Washington Post: A roadmap to saving Medicare

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The Washington Post

A road map to saving Medicare By Paul Ryan Friday, August 13, 2010

The annual analysis of Medicare's financial health released by the program's trustees on Aug. 5 led some Democrats to claim that Medicare's imminent bankruptcy has been delayed, thanks to the creation of their health entitlement program. Only in Washington could the government raid one entitlement program to finance a brand-new one and still claim that deficits have been reduced and entitlements have been reformed.

The trustees' report compares the revenue that supports Medicare's trust funds with the program's planned expenditures. Last year's report revealed a $38 trillion shortfall over the next 75 years. This year the shortfall appears to have decreased, but only after the Democrats' health bill cut $529 billion from Medicare. This apparent improvement was the basis for Democratic celebration -- even though the program remains tens of trillions of dollars in the hole.

With the same legislation that cut more than half a trillion dollars in Medicare spending, the Democrats created a nearly $1 trillion health-care entitlement. The Obama administration's own chief actuary has explained that in addition to the dubious assumptions on provider cuts and other claims of savings, the health-care law's Medicare cuts cannot be used to both reduce Medicare's unfunded obligations and pay for a new entitlement. And the Congressional Budget Office said in March that the health-care overhaul's Medicare savings "would be used to pay for other spending and therefore would not enhance the ability of the government to pay for future Medicare benefits."

Put simply, Medicare is on course to collapse. Medicare and interest on the national debt alone will soon overwhelm the federal budget, crowding out all other national priorities. The CBO estimates that Medicare will consume 12 percent of gross domestic product by 2080 (up from 3.6 percent of GDP today), bringing total health entitlement spending to 17 percent of GDP. Exacerbating our unsustainable trajectory, health spending explodes under the Democrats' health plan -- raiding Medicare, expanding Medicaid and creating two entitlements without any clue of how to finance the ones we have now. The economy simply cannot handle such crushing levels of taxation and the borrowing required to finance this spending; the CBO warned last month of a devastating debt crisis within two decades.

We do not have a choice as to whether Medicare will change from its current structure. It is being driven to insolvency. An honest debate requires a serious discussion of how Medicare will avert its collapse and be made sustainable. Unfortunately, but not surprisingly, the Democrats' political machine has attacked my contribution to this debate, making the false claim that the only solution put forward to save Medicare would "end Medicare as we know it."

The CBO has said that my reform plan, "A Roadmap for America's Future," would put Medicare on a sustainable path. The plan protects and preserves Medicare for those enrolled now and for those who will become eligible in the next 10 years, while reforming the program to ensure it will be there for younger generations. Future seniors would have access to the same coverage I enjoy as a congressman.

Far from the claims of "radicalism," this proposal is based on a key reform from the National Bipartisan Commission on the Future of Medicare, chaired by then-Sen. John Breaux (D-La.). That commission in 1999 recommended "modeling a system on the one Members of Congress use to obtain health care coverage for themselves and their families." 

Future Medicare beneficiaries would receive a payment to apply to a list of Medicare-certified coverage options. The Medicare payment would grow every year, with additional support for those who have low incomes and higher health costs, and less government support for high-income beneficiaries. The most vulnerable seniors would also receive supplemental Medicaid coverage and continue to be eligible for Medicaid's long-term care benefit.

If we act now, we can avoid disruptions for current seniors while advancing patient-centered reforms so Medicare will be strengthened for future beneficiaries. The alternative is the European-style death spiral of the welfare state: kick the can down the road as our debt explodes. Under an ever-expansive, all-consuming central government, costs will be contained with Washington's heavy hand imposing price controls, slashing benefits and arbitrarily rationing seniors' care.

The Democratic leadership will seek to brand every Republican running for office with my road map. Ironically, if Democrats succeed in demagoguing to death efforts to save Medicare, that political victory will hasten the program's end. While I am proud to have 13 House Republicans co-sponsor the legislation, and have been overwhelmed by the support outside the Beltway, my plan is not the Republican Party's platform and was never intended to be. This proposal is my sincere attempt to break the political paralysis on entitlement reform, to show that this challenge can be met -- mathematically and politically -- and to challenge those who disagree with my proposal to offer their own.

The writer, a Republican from Wisconsin, is the ranking minority member of the House Budget Committee.

The New York Times: Waiting in the Wings to Be Chief G.O.P Dealmaker

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The New York Times

Waiting in the Wings to Be Chief G.O.P. Dealmaker


August 11, 2010

WASHINGTON -- As lawmakers head home this week for what remains of summer, one question transfixes Washington: Will Democrats lose control of the House and possibly even the Senate in November, or will they hang on to fragile majorities? 

Whatever the outcome, though, another question looms large for the White House: What next? 

Life will certainly be marginally easier for President Obama if his party holds on to the House (he won't have to endure a spate of needling investigations, for one thing), but either way, the days of legislating through one-party governance are most likely coming to an end. If the president is to accomplish anything significant between now and the 2012 election, he will probably have to find the kind of deal-making adversary that Bill Clinton had after Democrats lost power in 1994 -- a Newt Gingrich type who might bluster and brainstorm his way to compromise. 

And this, perhaps, is where Paul Ryan becomes more significant. 

Mr. Ryan, as you may have heard, is the Republican star of the moment. A 40-year-old from southeastern Wisconsin serving his sixth term in the House, Mr. Ryan has been getting a lot of attention for his "Roadmap for America's Future," an unusually austere proposal to vanquish the federal debt by, among other things, partly dismantling Social Security and Medicare as they currently exist. 

Republicans admire the boldness of Mr. Ryan's vision, even if his proposals are a little too bleak for the campaign trail. "He's not saying the world's going to be full of butterscotch sundaes," is how Jeb Bush described the plan to me recently. "He's saying: 'Eat your broccoli. And then maybe you don't get to eat at all for a few days. You don't get steak -- ever.' " 

Liberals have taken note of Mr. Ryan's road map, as well. Paul Krugman, the New York Times Op-Ed columnist, recently derided Mr. Ryan as a "flimflam man," arguing that the tax cuts in his plan would ultimately make the debt worse. The Democratic Senatorial Campaign Committee, meanwhile, has attacked several Republican candidates for praising the plan, accusing them of wanting to roll back entitlements. 

Let's leave aside for now the debate over the viability of the road map, which, as a practical matter, doesn't stand a chance of being enacted as is, anyway. The more pertinent question is whether Mr. Ryan is the kind of guy who just wants to make a point -- or whether his road map represents the starting point in what could be a serious negotiation about entitlements and spending. 

We tend to think of bipartisanship as cooperation among a few pragmatic principals in both parties who already agree on how to solve a particular problem. A good example is the recent bill on climate change advanced by the Democrats John Kerry and Joseph I. Lieberman with their Republican colleague Lindsay Graham, which stalled in the Senate. 

But what President Clinton and Speaker Gingrich demonstrated in the mid-1990s is that meaningful bipartisan agreements can also be forged by fierce and ideologically opposed competitors who wrestle each other toward a tolerable consensus, as long as that consensus stands to benefit both parties politically. 

Those two men agreed on little, having come of age on opposite sides of the cultural and political divide of the 1960s. What they shared, however, was a common desire to do big things and geeky, almost twisted delight in going through budgets line by line. In this way they managed to negotiate consequential deals to balance the federal budget and remake the welfare system. 

Mr. Obama hasn't found that kind of useful nemesis on the right (his relationships with Republican leaders might best be described as estranged), and until now he hasn't really needed one. Mr. Ryan, of course, wouldn't be empowered to deal with the White House in the way that Mr. Gingrich was as a Republican speaker. But as the party's most public face on fiscal issues, there are reasons to think Mr. Ryan could become an influential emissary if the president is serious about assembling a coalition for a budget overhaul. 

First, Democrats who know Mr. Ryan will tell you that he can have strident disagreements without being blindly partisan or personal. Among his social friends in Washington, Mr. Ryan counts Peter R. Orszag, the just-departed budget chief for the White House. On the president's debt-reduction panel, to which Republicans appointed him, Mr. Ryan has forged strong working relationships with several Democrats, including the co-chairman, Erskine B. Bowles, and the labor leader Andy Stern. 

"My favorite kind of people in politics," Mr. Ryan said in an interview, "are people who have strongly held beliefs and fight for them. They're in politics for the right reason." 

Second, Mr. Ryan appears to be the rare kind of guy who actually dreams of making Social Security solvent, rather than of using the issue to bludgeon opponents or get himself on television. While his own proposal for private investment accounts might be a deal-breaker for the White House, he identifies Social Security as an area where there is "clearly room for compromise" and says of his road map generally, "I'm trying to get the discussion to an adult level." 

Finally, in Mr. Ryan, the president might well find a generational and temperamental peer, just as Mr. Clinton and Mr. Gingrich must have recognized in each other the same manic energy and grad-school nostalgia. Mr. Obama singled out Mr. Ryan at a visit with Republican House members last January, saying that he had read the road map and considered it a serious proposal. He joked then that while he had met Mr. Ryan's "beautiful family," he didn't want to hurt the congressman's political prospects by saying anything nice about him. 

Mr. Obama and Mr. Ryan haven't spent much time together, but both men are cool-blooded, intellectual types who are struggling to articulate a way past the era of "childish things" that Mr. Obama talked about at his inauguration -- the governing unreality bequeathed to them by the boomers. 

For his part, Mr. Ryan says he suspects the president is more of an ideologue and less of a dealmaker than Mr. Clinton was. But, he adds hopefully, "even ideologues have to bend to reality from time to time." November is coming, and the time to bend may soon be at hand.

The Wall Street Journal

"Washington vs. Paul Ryan"

by WSJ Editorial Board Paul Ryan's vision "is a threat to the ideology of those like Mr. Krugman." ..."Ryan is really presenting Washington with a philosophical choice between the status quo of an ever-larger and ever-more indebted government and a plan to pay for the promises we've made while still preserving free markets and economic growth."  "[Ryan Roadmap's] immediate virtue is that it gives leaders in both parties heartburn because it applies the fiscal honesty that everyone claims to favor. Taxpayers need someone like Mr. Ryan to expose the emperor's naked budget."  -->read more

Racine Journal Times

Ryan draws national praise and attacks

-by Stephanie Jones, Racine Journal Times "What Paul Ryan is doing is actually providing an alternative to what the Democrats are proposing and what they have done." Likewise, Jay Newton-Small, a Time Magazine political correspondent, said in a phone interview, "He is an interesting character in that he is one of the few ideas guys on the Republican side ... And his ideas are pretty bold."  -->read more

The Atlantic: The One Politician who puts his Money where his Mouth is

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Video: A Roadmap for America's Future - Paul Ryan talks with Greta Van Susteren 7/22/2010 - Fox News Channel

The Atlantic


Aug 10 2010

The One Politician who puts his Money where his Mouth is

By Megan McArdle

As I think I may have mentioned, I am skeptical of Paul Ryan's roadmap.  Not because it's dishonest, but because it's hard.  Really hard.  As in, I-don't-see-how-it-could-possibly-survive-the-legislative-process hard. 

The tax rates in his alternative tax plan would probably have to go up, just because that's the general fate of policy proposals that go through the legislative process; people with policy proposals are, almost definitionally, not pessimistic about their possibilities.  The entitlement changes would be gleefully gutted by politicians with a keen eye to their own re-election.  The discretionary spending freeze would not survive first contact with the next recession.  Even the most responsible, careful politician cannot guarantee responsibility and care in their successors. 

Nonetheless, I think it's a really, really important document.  Why?  Because it is the most honest attempt I've seen by a politician to grapple with the challenges ahead of us.  Strike that; it is the only attempt that I'm aware of to grapple with what lies ahead of us.  Others have been willing to discuss things piecemeal, or delegate the nasty job of balancing a budget to a commission, but as far as I know only Paul Ryan has come forward and said, "Here's how all the moving parts are going to fit together." 

And what this document shows is that it's going to be difficult.  Regardless of what you think of his tax plans, Paul Ryan has done what liberals keep asking Republicans to do:  show us what he'd cut.  No, he hasn't gone through the whole budget with a fine toothed comb and given us the exact funding level for the Bureau of Indian Affairs.  If he had, it would be stupid; even the most powerful legislator cannot tie the hands of those in the future completely.  He's offered cuts to domestic discretionary spending and entitlements that would hold the line under 20% of GDP.  If Republicans want to shrink the size of government, they're going to have to sign onto Ryan's spending plan, or put forward their own, with equally dramatic trimming. 

Paul Ryan has been honest enough to suggest radical changes to entitlements that we know, after the bruising rounds of health care reform, would be politically very unpopular.  He hasn't gone out of his way to point out how unpopular they would be, but he hasn't really hidden it, either.  The people complaining that he hasn't spent all his time highlighting the least popular aspects of his roadmap are making ridiculous demands that they would never deliver to their own side.  They might as well claim that true honesty demands that he campaign in his birthday suit and open every speech with his unvarnished feelings about his mother in law. 

Don't get me wrong, there are fair criticisms, and I'm trying to make some of them.  But I'd love to see the people kvetching about his plan offer an alternative plan of their own.  How much tax revenue would it take to pay for the welfare state that Democrats want us to have?  How deeply are they willing to cut military spending?  What politically difficult choices are those sniping at Paul Ryan willing to make?  His plan may have flaws, but I'll take it over people who have vague plans to deal with the problem by raising taxes on the rich, "closing the loopholes", or, um, ending our wildfire epidemic of unnecessary amputations.  If Democrats are serious about the budget deficit, then they too will need to propose a set of equally dramatic changes. 

Why haven't they?  Presumably, because it would be awful.  Without entitlement cuts, the necessary tax rates would be very high, and not just on the rich.  Military spending cuts would have to be deep, and still wouldn't cover the shortfall.  Government as a share of GDP would rise sharply, and right-wing pundits would not neglect to add the state and local burden up to a number that would distress many Americans.  Who vote. 

Do you want to be the one to tell them that they're going to have to pay higher taxes for the same, or lower levels of services?  I've been trying to tell them that for years now, and believe me, on the fun scale it's somewhere between a root canal, and seeing Neil Diamond live . . .  at the kind of venue that doesn't serve alcohol. 

But if we're going to avoid a real, ugly fiscal crisis, the sort that ends up immiserating a bunch of people, someone is going to have to tell them.  Someone in Congress, I mean.  The deficit commission is not going to accomplish anything if congress isn't willing to assess its priorities and make some hard choices.  You may think that Paul Ryan is too hopeful about some areas of his plan; you may think that it won't work.  All fair enough, and that's why any starter plan like this has to go through a lot of refining before it's ready to become legislation.  But at least Paul Ryan has a plan, no matter how incomplete or unworkable you think it may be.  That's more than the rest of us can say.  

Megan McArdle is the business and economics editor for The Atlantic. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and the Economist

Business Week: U.S. Crash looms without Roadmap Directions

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U.S. Crash Looms Without Roadmap Directions 

Commentary by Caroline Baum

July 8 -- The U.S. debate over more government spending versus fiscal austerity is captivating the nation's capital, dominating the airwaves and providing the best excuse in at least a millennium to recycle St. Augustine ("Lord, make me chaste, but not yet").

What it has failed to do, with rare exception, is produce any viable alternatives. The choices are warmed-over Keynesian pump-priming or "passively waiting for disaster," as Harvard University historian and business school professor Niall Ferguson put it on the July 4 edition of CNN's "Fareed Zakaria GPS."

There's got to be a better way. And there is. Ferguson advocates "radical fiscal reform" to address America's entitlement problem -- Medicare and Social Security will eventually consume the entire federal budget -- and simplify the tax code by introducing a simple flat tax and a lower corporate rate.

"It's pretty radical," Ferguson told Zakaria. "It has almost no congressional support. But it is an option that we should be discussing much more seriously."

At least one congressman is doing just that -- and learning how lonely it can be crusading for real change. Paul Ryan, Republican ofWisconsin and ranking member of the House Budget Committee, introduced his "Roadmap for America's Future," version 2.0, in January. (He proposed his first Roadmap in 2008.) President Barack Obama called it a "serious proposal" when he dropped in on the House Republican retreat.

Solid Report Card

Compared with the current fiscal crash-and-burn trajectory, the plan reduces deficits and debt, putting the federal budget on a sustainable path; results in stronger per-capita economic growth; puts Medicare and Social Security on a sound footing; and lowers health-care expenses while reducing the number of uninsured.

And that's not Congressman Ryan talking. That's the assessment of the non-partisan Congressional Budget Office, which gave the Roadmap a test drive and found that it performed well.

Ryan calls his Roadmap a prosperity plan, not an austerity plan that slashes benefits to the sick and needy and imposes growth-killing tax increases. Anyone 55 and older will remain in the existing Medicare and Social Security programs. For those under 55, benefits will be means-tested and health-adjusted: The poor and sick will get more than the wealthy and healthy. Even an individual's initial Social Security benefits would be "progressive," with more generous wage-indexing retained for low-income workers. The retirement age would increase gradually, as it should with longer life expectancy.

Empowering Individuals

What's more, individuals would have the option of investing a portion of their payroll taxes in personal-retirement accounts that they can pass along to their heirs.

Those qualifying for Medicare would be given a voucher to purchase health insurance, letting market forces create competition and lower costs.

The same goes for Ryan's "patient-centered health-care reform." Increased transparency would let consumers of health care get a better sense of what things cost and what they're getting for their money -- before they get sick. The Roadmap provides arefundable tax credit and eliminates the tax exemption for employer-based health care.

The best part of Ryan's plan relates to taxes. Taxpayers would get to choose between filing their taxes the old-fashioned way (devoting endless hours to complying with or gaming the tax code, or paying someone else to do it for you); or they can file their return on a post-card equivalent, paying one of two flat rates with virtually no deductions or exemptions. I know which one I'd choose.

The Roadmap would eliminate the alternative minimum tax and replace the corporate tax with an 8.5 percent business consumption tax, making the U.S. more competitive globally and spurring faster growth.

Room of No-Shows

Ferguson said when he was invited to a dinner in Washington for folks committed to fiscal reform, he wondered "how big a hotel" it would take to accommodate all the interested parties. Three congressmen showed up, he told Zakaria.

"I'm depressed how few people in Washington are prepared to talk about this option," he said. "It seems to me actually our best hope."

It is. So why is there so little inside-the-Beltway enthusiasm outside of Ryan's 12 co-sponsors in the House and a handful of reform-minded individuals in the Senate? Where is the courage to confront, and solve, this country's real, intractable fiscal problems? In its latest budget outlook, the CBO warned that federal debt could reach 185 percent of gross domestic product by 2035.

Status Quo Ante

Instead of engaging in meaningful discussion of Ryan's or alternative Roadmaps, lawmakers are teeing up the same old debate over more government spending, the effect of which is highly questionable (and that's being generous); and draconian spending cuts and tax increases, which are never fashionable in an election year, nor a good prescription for a weakened economy. (Come to think of it, there's never a good time for the political class to impose discipline.)

Our elected representatives continue to sidestep a real fiscal fix, hoping U.S. Treasuries will be perceived as the least-bad option by international investors for a while longer.

The other conclusion is even less palatable. Congress may prefer the status quo, using a loop-holed tax code to reward favored constituencies in exchange for campaign contributions that ensure lifetime employment.

Can there be a better argument for radical fiscal reform?

Racine Journal Times Op-Ed: President's words don't match Wisconsin's reality

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Video: Paul Ryan on Washington's Failed Neo-Keynesian Experiment 7/1/10 - House Budget Committee hearing

The Racine Journal Times

President's words don't match Wisconsin's reality

By Paul Ryan

Representing Wisconsin's 1st Congressional District

July 2, 2010

Any visit by the President of the United States to our great state is always welcome, but the timing of President Obama's Town Hall meeting this week came at a critical time for the state of Wisconsin and the Racine community in particular. Families and businesses in our communities are facing tremendous challenges- they have been forced to make tough decisions in a harsh economic climate where jobs are scarce and credit is limited. 

The President had the opportunity in Racine to explain why - with a co-operative Congress dominated by his own party, which is capable of passing any bill he asks - his policies have made the situation worse for Southern Wisconsin instead of fulfilling the promises of economic recovery and growth. 

Sixteen months ago, a $787 billion emergency "stimulus" was rushed through Congress with bold declarations that it would keep unemployment under 8% and spur quick job growth. Yet today, a considerable portion of stimulus funds remain unspent, national unemployment is hovering at 10%, and in hard-hit cities like Racine it has reached 14%. And while the private sector has shed 3 million jobs since the stimulus passed, the federal government has gone on a hiring spree. This spending binge was promised to deliver jobs and economic stability and these promises have failed to be kept. 

Wisconsinites understand that you can't take money from the productive sector of our economy, funnel it through Washington, and create jobs and prosperity. But those running Washington are intent on doubling-down on this "borrow and spend" approach and seem to be ideologically blinded to the real consequences of these policies.

The rhetoric from the President simply does not match the reality. During the health care debate, the President and Democratic leaders unrelenting refrain was: 'if you like your current health care plan, you can keep it'. And despite repeated warnings from independent and non-partisan reports, we are finding out - just three months after the bill's passage - that millions of Americans will either be dropped from their current plan or see changes that will affect their access to health care.

The same problems exist with the President's energy policy, as Wisconsinites saw this week when the Export-Import Bank initially denied loan guarantees that would keep 1,000 Midwesterners employed. I was glad to see that in this instance, the Administration recognized that keeping good paying jobs here at home was more important than trying to reduce global warming by a fraction of a degree over the next 100 years. Unfortunately though, the uncertainty that Bucyrus and its employees felt over the last week is a harbinger of things to come should the Administration continue to pursue policies that put the interests of the liberal special interest groups above the interests of the American people. 

Rather than compounding our economic problems and driving our nation deeper and deeper into debt with little to show for it, we need to put forward sustainable, common-sense plans to grow our economy. Instead of erecting new hurdles for small businesses and entrepreneurs, we should reduce government-imposed barriers to grow, produce, create and innovate. We need to instill a sense of certainty and confidence for investment and job growth. 

We must start reforming government and put in place a plan for growth and prosperity. I've put forward one plan, A Roadmap for America's Future, which spurs job-creation, pays off our debt, and promotes sustained economic growth. The Roadmap puts our country in a position to lead, rather than follow, in the 21st century global economy. 

It stands in direct contrast to the Administration's approach and empowers the American people as opposed to expanding the federal government. We have seen the painful consequences of the federal government's continued spending and borrowing binge. It is making things worse not better and we urgently need to chart a different course.

Chicago Tribune Op-Ed: America's First Debt Crisis

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Video: Paul Ryan and Dylan Ratigan on the need to fix fiscal crisis 6/28/10 - MSNBC

Chicago Tribune,0,7299641.story 

America's first debt crisis

Honoring our founders' wisdom

By Paul Ryan

July 4, 2010

The Declaration of Independence, 234 years ago today, proclaimed that self-government exists in order to secure the rights of the people. As we celebrate America's birthday, it's easy to forget that this experiment in freedom nearly collapsed in its first decade because of a massive debt crisis.

The wave of debt now bearing down on the U.S. poses no less a threat to our way of life than our first debt crisis did. Can we learn anything from the financial upheavals of the 1780s that might guide us today?

Following the Revolutionary War, the U.S. found itself under a mountain of mostly foreign debts. Financial collapse wrecked the new American economy and foreign trade, brought civil violence, set states against each other and endangered our nation's moral character. Every state acted like a separate nation. The national government, under the Articles of Confederation, was practically moribund.

Some printed huge quantities of paper money with no guaranteed value, resulting in uncontrolled inflation. Creditors rejected this unsecured paper. Without real money, commerce ground to a halt. Farmers were especially hard hit. Some states enacted laws preventing debt collections, causing credit to disappear completely.

Massachusetts rejected these debtor laws. In 1786, gangs of farmers, led by Revolutionary War veteran Daniel Shays, terrorized the western region. To stop foreclosures, they shut down the courts. The reign of violence peaked when upward of 2,000 men tried to capture the national arsenal in Springfield but were driven off by state militia.

In December 1787, two ringleaders of the Shays Rebellion were hanged. The U.S. was on the verge of dissolution. Self-government had become a mockery. Soon, the Old World powers would recolonize the states, perhaps invited by Americans themselves to restore order.

Earlier that year, a few public-spirited leaders who desperately wanted America's experiment in freedom to succeed met inPhiladelphia. Rising above personal and partisan rancors, they drafted a new Constitution with the powers necessary to address the debt crisis and economic collapse.

The new government, led by President George Washington and Alexander Hamilton, his treasury secretary, resolved to assume, fund and pay off all foreign, private and state debts.

In 1791, the national debt equaled about 40 percent of the gross domestic product. With its interdict on paper money and its stable dollar guarantee, the Constitution combined with the financial instruments Hamilton created to fund the debt provided an incredibly powerful stimulus to economic growth. National and foreign trade reopened. Federal revenues grew rapidly from sales of western lands and the tariff. Old taxes were cut, and the Jefferson and Madison administrations imposed new limits on federal spending. By 1836, 45 years after Hamilton initiated his audacious debt plan, the U.S. government paid off the entire debt.

From this history, we see that a debt crisis dissolves social bonds, weakening economic, personal, social, moral and political relationships. As government monetizes the debt to meet rising interest rates, inflation is unleashed and the currency devalued. Money whose future value is unpredictable cannot serve its most important purpose, to provide a common rule to equate goods, services and work effort. When social transactions are undermined, people lose trust in one another.

A society without trust cannot long remain free. A paralyzed democratic government, unwilling to act against a predictable threat, such as a growing debt crisis, invites popular contempt and resistance. Frightened citizens whose representatives will not protect their private property or the public treasury may not only give up on their representatives but dismiss constitutional self-government as weak, inadequate, servile and ignorant.

Recent polls show a near majority believe their government has now become the chief danger to their rights.

America's looming debt crisis challenges this experiment in democracy. Political leaders should meet this crisis with the same seriousness and determination they would bring against an invading army. There are no Madisons, Hamiltons and Washingtons to save us from our folly, nor do we need a new Constitution. Yet the courage, imagination, wisdom and public spirit that provided the founders with the plan to end America's first debt crisis can also supply our needs. We only need leaders who will rise above narrow partisanship to confront our debt challenge and save our exceptional country. 

Republican U.S. Rep. Paul Ryan represents the 1st Congressional District of Wisconsin

A Plan for Prosperity - Congressman Ryan addresses the U.S. Chamber of Commerce

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A Plan for Prosperity Rep. Paul Ryan (WI-01), Ranking Member of the House Budget Committee U.S. Chamber of Commerce - June 24, 2010

Well good afternoon everybody, thank you for indulging me - we just had a bunch of votes in Congress that caused me to be a little late. I hope your lunch went well. I understand we have the President of the United States coming here this afternoon with the Russian President Medvedev.

Perhaps he is coming to learn about free enterprise and free market principles and how it can help the Russian people. I am sure that this Chamber can give a lot of good advice on that front. 

What we've experienced is an American economy that has endured almost three years of decline and stagnation, with little business expansion, little credit availability, and little growth. Americans want job expansion and a growing economy. A year and a half ago they voted in a new political party to deliver on just that. You would think that after three years of decline, stagnation, and cut backs, we would be blazing out of a recovery. Usually, the bigger the drop in our economy, the bigger the bounce coming out of it. Yet with a co-operative Congress dominated by the President's party to pass everything he asks, there's no sign that we are even close to getting out of this economic desert. Unemployment is staying up there at around ten percent. 

To create prosperity you need entrepreneurs, workers, investors, and savers with enough trust and confidence to take the risk to lead to economic growth. Today, we've got uncertainty instead of confidence. We have mistrust, instead of trust. When they look up the economic road they see the prospect of rising taxes, exploding federal debt, they see the prospect of more regulations that will micromanage how they run their businesses. They see a dollar whose long term value is unpredictable. We have an administration whose highest priorities are to tax and spend your money, and I would argue to spread a more Progressivist bureaucratic control over every sector of our economy, whether it be health care, energy, or financial services. We have a Congress that this year won't even pass a budget, even though the law requires it. 

In short, we have a government that has lost the trust of America and sown economic and social mistrust everywhere. Who would invest in this forbidding environment? When investors are uncertain, capital flees to the security of long-term value: things like gold. Well, gold just hit the highest price ever - $1,258 per oz. 

Uncertainty is abound. What we see on the horizon is a wave of tax increases in 2011, followed by another wave of tax increases in 2013, followed by an additional borrowing and spending binge, which puts pressure on interest rates, further debases the currency. 

Let's look at employment data. As late as November 2007, 115.5 million people were working in the private sector. Since then, we've lost 8 million jobs. Only this year have employment numbers begun to creep up. We are creating an anemic 99,000 private sector jobs per month this year. We have to create over a 125,000 jobs every month just to absorb new entrants in the labor force, and at this current 99,000 rate we are at, we will never get to where we were on unemployment two and a half years ago. If we want to get back to that unemployment rate, we would have to create 250,000 jobs a month for five years straight. At this rate we are courting our own "lost decade," wandering in an economic desert of stagnant production, underutilized capacity, and high joblessness. To put it another way: we are beginning to look like the European social welfare models so beloved by many of the ideologues that we have in Congress and in our Federal government these days.

Now I know those are tough words but if you take a look at where we are today, I really believe, when I talk to entrepreneurs, large and small business people, they are sitting on their hands. You talk to the bankers who are telling you even the businesses that have excessive lines of credit, they are not utilizing them. America should be moving forward right now - removing barriers to growth instead of building new barriers on top of people. 

I have no doubt that we could be on the road to solid economic growth if we addressed these barriers. Yes it took time to build them, and they are formidable: burdensome tax laws with excessive complication; regulatory state that is getting more punitive; distorted monetary strategies that don't give people a sense of security of our value of our money in the future; and above all, we have uncontrolled spending without budget priorities and entitlement strategies that simply cannot be sustained. 

No one will invest in the future if he doesn't trust the future . or is too uncertain of the future. And America's fiscal, monetary, and economic future right now is filled with mistrust, uncertainty, and disincentives to entrepreneurial decision making. And make no mistake: these conditions were not caused by people, they were caused by government.

Now let me just run through a quick town hall presentation that I do with constituents back home and I will do this fairly quickly if I can.

Where are we headed if you want to take a look at our current fiscal situation? The current administration has increased taxes in their budget by $1.8 trillion and spending by $2.5 trillion over the next ten years. That is the current budget that is in place right now. $670 billion of those tax increases have just passed a couple of months ago.

The budget we live under now doubles the debt in five years and triples it in ten years. The President's own budget director and treasury secretary, in a testimony to myself and others, has said that these debt levels are unsustainable. The budget that we are living under is not credible and sustainable. With each passing year our spending problem gets worse and the decisions become that much more difficult. 

Now this is our deficit path right now. I'm not here to say that everything that is wrong is created by our current President - he inherited a mess. President Obama inherited a very difficult fiscal situation. The question is, is he going in the right direction or is he compounding the problem? I would argue that he is compounding the problem. These are the deficits we are having right now. It goes down to about $700 billion dollars in 2013 and then pops right back up - an average deficit of a trillion dollars a year. 

What happens to your economy and country if you are piling up trillion dollar deficits every year? Well, you have a lot of debt. We borrowed more than we were earning or producing to win World War II. You can raise levels of debt like that so long as the markets believe that is temporary. And in those days, the debt was all owed to ourselves. US citizens, my grandfather used to tell me about this all the time, he was a navy man in World War II, you know the citizens floated the money to the government by buying T-bills or war bonds so that we could pay for the war. Well that is not the way the debt goes anymore. In 1970, 5% of our debt was foreign held; 1990 about 19% of our debt was foreign held; today 47% of all of the US debt is held by foreign governments, China chief among them. 

Here is what the Congressional Budget Office is telling us with respect to our debt. This is the path we are on right now. We are going to crush our economy if we continue going down this path. It is the interest itself that compounds so viciously and gets out of control. 

We are looking at an era where we are on the cusp of giving the next generation such an unsustainable burden of debt that they are not going to have the kind of living standards we have enjoyed in this country.

I'm forty years old, my wife and I have three kids. They are five, seven, and eight years old. By the time my kids are my age, according to the CBO, the size of our government will literally be double what is today at that time. So instead of taking twenty cents out of every dollar made in America to cash flow of the federal government, we will be taking forty cents out of every single dollar, made in America, just to pay for the Federal government. This is a path we have put them on. That is the tax trajectory that we are on. You literally can't have a growing economy when so much is being soaked up in the credit markets, when so much borrowing is occurring.

So, how does all of this end? Have we seen this movie before? Is there an example of somewhere else in the world we can look at to get an idea of what this ends up looking like? Well, turn on the TV. Look at Europe, look at Greece in particular. I think they are a cautionary tale of things to come. Basically what you have is a story of reckless government spending that has hit Europe with a deep debt crisis.

According to Robert Samuelson, a well known fiscal columnist, this tragedy is "death spiral of the welfare state." We know how cradle-to-grave social welfare states eventually end. They simply cannot cash flow themselves. You eventually run out of other people's money to spend. 

We realized that Greece was cooking the books, hiding the numbers. When it was truly revealed how bad their debt and deficits were, it was quickly then revealed that Portugal, Italy, Spain had the same problems. So now you have severe austerity plans being put into place to try to save their system in a crisis. Their currency is going down, their debt continues to go up, and their economies are slowing. Austerity means cutting current retirees, current benefits. Putting huge tax increases on your economy, on your labor force, on your businesses, on your young people. This slows down opportunity, prosperity, and job creation.

This is what happens if we let this get out of control. This is the future that awaits us if we go down this path of not preemptively dealing with our debt crisis. 

Here is a study that the IMF put out about a month ago. The IMF is basically saying we are already up there with the PIIGS. Our total debt level right now is above Spain, Ireland, and Portugal as it relates to our economy, that's the most important statistic. In five years, our debt level on our current trajectory is going to be up there with Greece and Italy. This is not a situation where we can think that we can run out the string much longer. 

Now, we have certain advantages. We have advantages because we are the world's reserve currency. We have advantages because we have a more entrepreneurial, nimble economy and if we can get the economy growing, if we can focus on spending, we can turn this around. 

Now, in 2007, as I became Ranking Member of the House Budget Committee, these numbers were already up there. These are not new numbers - these are just updated numbers. I decided to write a plan called "A Roadmap for America's Future". 

The idea of writing a plan was two-fold: 

1.Show a pathway out of this mess. Show how we can fix this problem in a way that fulfills the mission of health and retirement security, pays off our debt, and grows our economy so that we have higher living standards for future generations. 

2.I didn't claim to have all of the answers. My goal in putting this plan out there was to encourage others to put out their plans, so in Washington we can get beyond the business of finger pointing, attacking each other in political campaigns - and get on to the business of actually solving the problem. 

So what do I propose with the Roadmap? I will go over it very briefly. 

Tax reform. The tax code penalizes all those qualities that make us great: saving, investing, raising a family, starting a business, growing the economy, creating jobs, working. So I would replace the current tax system with a modified flat tax, retaining its progressivity. 10% on the first $100,000 for couples, 25% above that. No other taxes on capital or savings - no dividends, capital gains, or death tax. Those are double taxes on capital and retard economic growth and innovation. You can choose. If you want to keep the current system, with all of its bells and whistles, you can do that as well. If you want a simplified system, you can have it. If you want, you can give up all the loopholes, all those deductions, all those cats and dogs that are in the tax code. It's a very simplified system, so that businesses, entrepreneurs, and individuals, can actually have an easy clean postcard to fill out and move on. 

I would also replace the corporate income tax, with a better system. The corporate income tax is a killer of growth in this country. It is the second highest rate in the industrialized world (it's about to be the highest rate), and it punishes growth. It rewards companies who move their operations overseas. We should have a territorial tax system, not a worldwide system. We should have a system that says to businesses you ought to be able to expense every investment in plant and equipment the year in which it takes place. We also should have a border-adjustable system. Why don't we do to our competitors what they are doing to us? Take the tax off our exports and put it in on our imports to better level the playing field, to reward businesses for building things in America and exporting them. Let's acknowledge the fact that 97% of the world's consumers are outside of this country. Let's get our businesses in a situation where they are ultra competitive. Let's make sure that when businesses invest and build and grow here in America, that's the smart business thing to do. We don't want to have a situation where we are penalizing businesses for keeping their money, their capital, their headquarters, and their manufacturing facilities in America. So rather than having Ireland and the Cayman Islands to be the haven for capital formation, the place you park your money, why don't we make it America? I have no doubt in my mind that if we advance these tax reforms, not only can we raise the revenue we currently raise for the Federal government; but we can restart the American engine of economic growth.

I also think you need to strengthen job training assistance. We have so many different job training programs in the Federal government - dozens of them, duplicative and overly complicated. Let's consolidate them so if a person loses their job in an industry that is not working - the auto industry in my area - give the person the ability to go back to school, learn a new skill and a new trade, mid-life, mid-work career, so that they can get back into the work force with a high paying job that gives them the skills to be mobile in a dynamic economy. You don't have the same job for your entire life like you used to in our parents' generation. You've got to have a system of life-long learning.

Social Security and Medicare. We can do this save these programs right now without changing any benefits to current retirees or those near retirement. That is the benefit of acting now. We do not have to force austerity, where you slash and cut people's benefits and raise taxes. For those over fifty-five, no changes. The benefits you organized your life around, that you planned your retirement around, that is not going to change. Even though they are unfunded and they have a huge liability, we will come up with a plan to actually finance those benefits. 

But if you're under 55, if you are in X generation, like I am, or the Y generation, you know that these benefits aren't going to be there for you anyway. There is no way that the government can come up with the $72 trillion dollars that it right now has to come up with to actually finance these benefits for younger workers. We can reform Medicare into a system that works like the one I have as a member of Congress. I get a payment, I get a book from the Federal government, a list of competing plans to choose from, and I pick the plan that is best for me and my family. I would adjust that payment in three ways: give people more money to cover all of their out of pocket expenses if they are low-income; if you are wealthy, we're not going to give you as much money; and as your health condition deteriorates, as you get sicker, you will get a better payment to make sure that your premiums stabilize. According to the Chief Actuary of Medicare, according to the Congressional Budget Office, my plan makes Medicare permanently solvent and wipe out its $38 trillion unfunded liability.

For Social Security, don't change anything for people over the age of fifty-five. Make sure that we can guarantee their benefits. But if you are under fifty-five, the money isn't going to be there for you anyway. So why don't we reform the system so that it will actually be there for you. If you want to stay in the traditional system, you can remain in the current program as structured - that is your choice. If you want a system where you can take a third of your payroll taxes and put them in a thrift savings account, exactly like I as a member of Congress or any other federal worker can, where it will be managed Social Security with safe indexed funds, my reforms will allow you to do that. You can grow your money. You can harness the power of compound interest. The funds become your property. It goes to your spouse or your heirs when you pass on. 

At my age, I am probably going to get a one percent rate of return if Social Security can pay me my money. My children, under the current formula, will get a negative one-percent rate of return if Social Security can even pay them their money. More people, eighty percent, pay more in payroll taxes than they do in income taxes. You ought to give young people the option and the opportunity - the choice - of getting a better benefit for themselves when they retire so it is a program that they have faith in.

You need to do a few common sense reforms for the traditional benefit to make it sustainable. I would index it so that wealthy people do not get as much of a benefit and it increases for everybody else. I would slowly raise the eligibility age over the latter part of the century, not in the near future, in the latter part of the century, to just reflect longevity. When Social Security was created, the retirement age was 65, life expectancy was 63, the numbers added up great. It is not like that anymore. So we need to make some adjustments to save this system. 

Medicaid. Let's give the States - the laboratories of democracy - the ability to customize their programs to meet their citizens' needs. We would give individuals a voucher to get private health insurance, with protections to people with pre-existing conditions. Where I come from, if you're on Medicaid and you walk into a doctor's office, you've got "poor person" stamped on your forehead. Fifty percent of the doctors won't even take you because they lose forty cents on the dollar for every person that they see. So why don't we have a system where we don't segregate the poor into an inferior health care system? Why don't we have a system so that we can give them the access the kind of private health insurance that everybody else has. You can do that in the way that we are proposing and save the system from insolvency and bankruptcy. 

Under current policy, government spending is exploding. By the time my kids are my age we go from twenty percent of GDP to forty percent and then on up to sixty percent. That's unsustainable. That extinguishes the American idea. With the Roadmap, according to the CBO, you can keep the size of our government relative to our economy to where it has historically been. 

What it really is all about is about standard of living. What does the future look like? Are we going to maintain the legacy that our parents told us about this country? Every generation confronts its challenges so that the next generation is better off. We are -irrefutably, mathematically, statistically, without a shadow of doubt, according to every fiscal authority - giving the next generation a lower standard of living. This is what the CBO says is happening in the future, standard of living we measure is economic growth per capita. How fast does the economy grow per person? The standard of living, because of the debt, starts to decline. The reason this line ends in about 2058 is the computers crash. The economic models of our government literally stop working because they cannot conceive of any instance in which the American economy can continue under the burden of debt that we are imposing upon it. 

If you get ahead of this debt problem - if you reform these programs, doing it on our terms, not imposing austerity but advancing prosperity - you can guarantee that we will have higher standards of living for future Americans. The next generation will be better off than our generation. There can be more jobs, better wages, and greater opportunity in this society. That at the end of the day is really what this is all about. 

We have had tough problems and hard knocks in society before. We have had issues in America that we thought we were down and out and other regimes were going to beat us. We were the laughing stock of Europe shortly after the founding of our country during our first debt crisis. You can go back to the Nixon inflation, the Carter stagflation, and more recent recessions.

Always voices were heard saying that America was finished, our greatest days were past, and some other nation's economies were overtaking us: Hitler's Germany or Khrushchev's Soviet Union, or Japan under MITI's industrial policy. Now those same defeatist voices are back: we can't do any better than we did before. And China will soon overtake us.

That is nonsense.

In every case, the courage and imagination of Americans have found prudent ways out of these crises. Our founders created a Constitution, sound money and a system of credit so that we could build a prosperous society. More recently, efforts to lower tax rates, reform welfare to incentivize work and investment, lowering trade barriers, these reforms allowed for sustained economic growth. The potential of our people to grow knows no limits. It is this government that's imposing barriers on imagination, enterprise, work, innovation, and savings.

The rising tide of debt, the rising tide of red ink, the failure of our political system to tackle these challenges means we will consign ourselves to that kind of a fate. 

We know how this movies ends. We've seen it across the Atlantic. So why don't we prevent it from happening here. There is a real battle over ideology and destructive populism. You can't love jobs and hate the people who create them. 

We need to remove the imposed barriers that prevent entrepreneurs from making decisions about the future. If we knock the future problems out of the way, we get a handle on this debt, reform our entitlements, we secure our currency, and we have a tax system that rewards rather than punishes wealth creation, job creation, and growth - we will succeed and we will grow.

We need a prosperity agenda. This is not about imposing austerity - far from it. It's not an either/or tradeoff between either austerity now to handle the debt or force feeding growth by government spending more money. That is a false dichotomy, a false tradeoff. 

This is a prosperity plan to get ahead of the debt crisis and fix it. This is a plan to instill confidence in our future. Americans - not our government - will get us back to growth and create jobs. 

Thank you for having me. I appreciate it. I'd be happy to answer your questions.

From Q&A:

o   Video: State fiscal woes 

o   Video: The True Cost of Obamacare 

o   Video: The American people deserve to be talked to like adults, not like children 

o   Video: Prepare for a costly lame duck session

Numbers too spooky to record - Milwaukee Journal Sentinel

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Video: Paul Ryan delivers weekly Republican address

Milwaukee Journal Sentinel

Numbers too spooky to record 

By Patrick McIlheran

June 26, 2010

Numbers, it seems, have become a frightful thing for the House of Representatives. 

House Majority Leader Steny Hoyer (D-Md.) let on last week that the House won't be doing a budget this year. It will spend money on this, that and several billion other things come fall, but it won't pass a budget resolution, the overall map that quantifies how much the government will take in and spend next year, and for some years beyond.

This sounds arcane, and Hoyer's concession - a resolution is months late, anyhow - set off the usual partisan attacks and defenses. Yawn. However, this failure is a symptom of something bigger that will rattle your life but will be good in the near future.

Hoyer, for the record, said that the House has reasons for skipping the budget. Besides, he says, it'll do something better: It'll gin up an "enforcement resolution" that, on the fly, will "require further cuts below the president's budget" and will try to offset new spending with cuts or new revenue. It's not a budget; it's more like guidelines.

And he promises a vote on whatever comes out of the president's appointed panel pondering ways out of our heretofore unimaginable deficit.

That's nice. Incidentally, the president doesn't cut his budget but would increase it by about $163 billion, following last year's 27% jump in discretionary spending. The pay-as-you-go offsets exempt vast tracts of the budget. And the wise men of the deficit commission are due to deliver their ideas in December. That's three months into the next fiscal year and, you'll notice, after Congress next faces voters.

This will be the first time in the modern budget era that the House won't put the numbers on paper. House and Senate have agreed to disagree a few times, but this year, the House isn't even going to try.

"Just spending, that's all they're doing this year," said Rep. Paul Ryan of Janesville, who is the lead Republican on budget matters and is thus shut out entirely.

"They want to spend a lot of money, but they don't want to budget for it."

Hoyer's talk of the deficit commission fits this. He correctly pointed out that deficits can be cured only if Congress reforms the majority of spending that's on autopilot, the entitlements that promise care and support to practically everyone. Congresses for decades haven't fixed these, lacking the nerve. Now, Hoyer and his Democratic majority seem to hope they'll be able to say, "It's not my fault! The deficit panel made me cut your Medicare!"

Or raise your taxes: Hoyer also said the government must, long-term, snatch still more of what Americans earn. He even hinted - this is new - that Congress may raise taxes not just on "the rich" but on those earning less than $250,000 a year, at least maybe after next year.

This could be why they're loath to put numbers on paper: The numbers are frightful. People will start noticing that even in its early stages, Obamacare will cost far more than promised. They'll see the piled-up zeros of failed stimulus. They'll see taxes that, they were told, would only land on others.

All right, the Democrats lack budgetary courage. The Republicans were scarcely better when in power. All that's new is the majority's deliberate budgetlessness.

But this isn't just politics; it has real effects.

A managing director for the mutual fund company Fidelity, Bruce Johnstone, warned in Waukesha the other day that the more the government tinkers with the economy's rules, the weaker any recovery will be. Small businesses particularly are wary of what surprises lurk. Uncertainty, Johnstone pointed out, deters growth, hiring and prosperity's return.

Johnstone was simply speaking old truths, but perhaps Congress forgot them. By failing to budget the quarter of the nation's economy that is federal spending, lawmakers are adding huge uncertainties. By fearing to quantify what government will cost, they suggest the numbers are even worse than anyone suspects.

By dodging duty, they're making the future dangerously opaque. If you want to know why the recession is dragging on far longer than most, this is one of the reasons. 

Patrick McIlheran is a Journal Sentinel editorial columnist.

Wisonsin State Journal editorial: Stem the Stimulus

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Video: Opening Statement by Ranking Member Paul Ryan (WI), House Budget Committee 6/9/10 - Full Committee Hearing with Federal Reserve Chairman Ben Bernanke (Text of Remarks)

Wisconsin State Journal

Stem the stimulus

A Wisconsin State Journal editorial | Posted: Saturday, June 12, 2010 9:00 pm

America's debt used to be dismissed as "money we owe to ourselves."

Not anymore.

As U.S. Rep. Paul Ryan of Wisconsin stressed Wednesday during a meeting with House Budget Committee members and Federal Reserve Chairman Ben Bernanke, foreigners now own roughly half of U.S. publicly-held debt.

Moreover, our nation's IOUs to all lenders just topped $13 trillion, with interest payments expected to triple over the coming decade, the Congressional Budget Office suggests.

It's time to get serious about controlling federal spending now that the economy is slowly improving.

"There is a need for policymakers to reassure credit markets that the U.S. is engaged in charting a clear course back to sustainable deficit and debt levels soon," Ryan told Bernanke last week.

He's right.

Yet Bernanke suggested a measured approach for now.

"This very moment is not the time to radically reduce our spending or raise our taxes because the economy is still in a recovery mode and needs that support," Bernanke said at Wednesday's hearing.

Fair enough.

But just as important is for President Barack Obama and both major political parties in Congress to cooperate on what Bernanke dubbed "a fiscal exit strategy" for the next three to five years. The soaring annual budget deficit, expected to reach a record $1.6 trillion next year, needs to fall back toward Earth.

"The Federal Reserve has a strategy for exiting from our monetary policy" that includes record-low interest rates, Bernanke noted. The president and Congress need "to have a strategy for exiting from your fiscal policy," Bernanke told lawmakers.

America still has a lot going for it. Our economy is large and flexible, Bernanke noted, and our financial markets are deep and liquid. U.S. Treasury securities continue to be viewed as a safe haven for money.

But the recent financial bailout of Greece and its ripple effects across Europe should serve as a warning on this side of the Atlantic. Ryan was especially and appropriately blunt on this point:

"Americans are left to wonder: Could we one day find ourselves at the epicenter of such a crisis? Could a European-style debt crisis one day happen right here in the U.S.? The answer is undoubtedly 'yes.' And the sad truth is that inaction by policymakers to change our fiscal course is hastening this day of reckoning."

It's time for everyone in Washington to get serious about fiscal discipline because, as Bernanke said, the federal budget "appears to be on an unsustainable path."

Wisconsin's congressional delegation should be skeptical of new stimulus spending. Remember that Obama's $787 billion stimulus from last year is still playing out.

As for the long term, Obama's bipartisan debt commission - chaired by former Clinton White House Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson - appears to be the nation's best hope.

The commission is charged with crafting a plan to reduce the budget deficit to 3 percent of gross domestic product by 2015. Thecurrent budget deficit is almost 10 percent of GDP.

That means any proposal from the debt commission will include some painful yet necessary actions. As the economy improves, so must America's bottom line.

Updated Issue Papers

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Dear Friend,

I am pleased to share with you updated reports and information on legislation, programs and policies that impact you as an individual, as well as all of us who live in Southern Wisconsin.

By clicking on the following link, you will be taken directly to the section of my web site where you can view the issue papers of interest to you: Or, to view all of my issue papers in a single document, please click here.

As you know, Washington's reckless spending and borrowing spree will bankrupt our nation. Our unsustainable path will hit American families with a tidal wave of debt and crushing levels of taxation - resulting in a painful economic crisis. We can and must chart a new course. My Roadmap for America's Future meets this challenge, restoring the promise and prosperity of our exceptional nation. Click here for more information regarding my Roadmap, or visit

Keeping you advised of the most recent developments in domestic and international policy is extremely important, and your continued feedback on these matters is appreciated. I hope that you find these materials useful and responsive to your questions and concerns.

Please know that your input is always welcome, as it is a vital tool that I use to better serve you. Feel free to contact my office to share with me any questions, concerns or ideas you may have by calling toll-free in Wisconsin at 1-888-909-RYAN (7926), or at(608) 752-4050. If you would prefer to e-mail me, 1st District residents may do so by clicking on the following link:

Please do not hesitate to let me know if you need additional information or if you are a 1st District resident and require assistance in dealing with problems involving agencies of the federal government. As always, I am happy to respond and be of service to you.

Sincerely, Paul Paul Ryan Serving Wisconsin's 1st District

Thanking those who took part in last week's Listening Sessions

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Click to play video

Paul Ryan speaks with Rep. Walter Jones about efforts to reduce our nation's debt and deficit and restore America's economic prosperity 6/13/10 - Washington Watch, June Edition

Congressman Paul Ryan: Thanking those who took part in last week's Listening Sessions

I want to thank my employers - the residents of Wisconsin's 1st Congressional District - who attended one of the 10 listening sessions that I held last week. I was grateful so many came out to learn, share, and voice their opinions at these forums. 

It is my hope that those who attended learned more about my efforts to rein in government spending and reduce our nation's debt, received answers to questions about federal legislation, and were able to discuss their thoughts on the direction of our country.

For those who were unable to attend, you can access video from the listening session held at Greendale High School on June 1st here

Also, a copy of the PowerPoint I presented during the listening sessions, "America's Debt Crisis: The Need to Act Now", can be accessed here

At each of these discussions, I heard from Wisconsinites who are frustrated with Washington's out of control levels of spending, borrowing, and taxing. Rather than tackle our country's economic problems, those running Washington are creating brand new ones. Individuals are upset that Washington isn't listening to their concerns and are hungry for solutions that will put our nation back on a fiscally sustainable path. 

I will be sure to keep the thoughts shared during these listening sessions in mind as I work to advance proposals that pay off our debt and restore our nation's economic prosperity. If you would like to learn more about my efforts as your federal representative, I would encourage you to visit:  or

Thanks again to all those who participated in making these listening sessions such productive and informative discussions.

Ryan Announces Upcoming Listening Sessions

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Ryan Announces Upcoming Listening Sessions

1st District Congressman Paul Ryan has announced the schedule for listening sessions that he will be holding in early June. Ryan will be visiting 10 communities throughout Wisconsin's 1st Congressional District to discuss the importance of reining in government spending, reducing our nation's debt and deficits to make possible economic growth and job creation, and address further concerns from the residents of Southern Wisconsin. In advance of the upcoming listening sessions, Ryan issued the following statement: 

"There is increasing frustration that Washington isn't listening to the concerns of the American people. With the need to spur job creation and economic growth and tackle the crushing burden of debt and taxes, it is important for me to hear directly from my employers of the 1st Congressional District. I look forward to continuing to discuss solutions to our nation's greatest challenges with those I serve during these listening sessions."

Please click here for a complete schedule of upcoming listening sessions

Paul Ryan Calls for Action to Avert Debt Crisis

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Video: Do we want opportunity society or welfare state?

Video: Do we want opportunity society or welfare state? 5/13/10 - Fox Business Network, Varney & Company

Video: Ryan on the need to tackle the debt threat

Video: Ryan on the need to tackle the debt threat 5/5/10 - MSNBC, The Dylan Ratigan Show

Video: Ryan disputes GM repayment claims; calls for clarity and transparency

Video: Ryan disputes GM repayment claims; calls for clarity and transparency

Investor's Business Daily

Of Crony Capitalism And European Austerity


Posted 05/12/2010 06:52 PM ET

To understand the pertinence to America of events in Greece, notice General Motors' most recent misbehavior.

A television commercial featuring CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears.

In the commercial, Whitacre says GM has "repaid our government loan in full." Rep. Paul Ryan, R-Wis., noted that GM used government funds to pay back the government: It "simply transferred $6.7 billion from one taxpayer-funded TARP account to another."

Government Motors

The government still owns 60.8% of GM's common equity, and the Congressional Budget Office projects that the government will lose about $34 billion of the $82 billion of TARP funds dispersed to the automotive industry.

When Ryan and two colleagues asked the Treasury Department for clarification, they got this careful reply: "Treasury has never suggested that the loan repayment represented a full return of all government assistance."

A Treasury press release did say "GM Repays Treasury Loan in Full." The loan is, however, a small part of taxpayer exposure. Under crony capitalism, when government and corporate America merge, both dissemble.

Now American taxpayers also own a little bit of a small nation. They provide the U.S. contribution of 17% of the assets of the International Monetary Fund, which is giving Greece $39 billion (the IMF also is contributing $321 billion to a "stabilization" fund for other euro zone nations with debt problems).

So the U.S. government, which would borrow 42 cents of every dollar it spends under the president's 2011 budget, is borrowing to rescue Greece and others from the consequences of their borrowing.

That nation, whose GDP is below that of the Dallas-Fort Worth metropolitan area, is "too big to fail," meaning too inconveniently connected to too many big banks. Bailing out Greece really rescues European banks that improvidently bought Greek bonds.

At the Parthenon last week, the Greek Communist Party, which got 8% of the vote in the last national election, draped banners emblazoned with the hammer and sickle: "Peoples of Europe Rise Up." Of course. "Arise ye prisoners of starvation," exhorts "The Internationale," the left's ancient anthem. But who is to arise against whom?

Time was, the European left said it spoke for horny-handed sons of toil oppressed in dark Satanic mills. But Athens' "anti-government mobs" have been composed mostly of government employees going berserk about threats to their entitlements.

Even Greek air force pilots went on strike. The government, unable to say how many employees it has, promises to count them. It cannot fire many because article 103, paragraph 4 of the Greek constitution says: "Civil servants holding posts provided by law shall be permanent so long as these posts exist."

America's projected $9.7 trillion in budget deficits in this decade will drive the nation's debt to 90% of GDP (Greece's is 124%).

So some people say that to avoid a Greek-style crisis, America should adopt a value-added tax.

But Europe's most troubled nations -- the PIIGS: Portugal, Ireland, Italy, Greece and Spain -- have VATs of 20%, 21%, 20%, 21% and 16%, respectively. As part of its austerity penance, the Greek government is going to give itself more money by raising its VAT to 23%.

Germany Turned Off

Germans are furious about being the biggest bailers in this bailout of a nation where tax evasion is pandemic. They've not been assuaged by being told by their chancellor, Angela Merkel, that the stakes are stupendous: Their money will save "Europe."

Hearing that, Greeks bearing banners proclaiming "Out with the IMF" might think:

Why accept "austerity" (as that is understood in Greece -- no more annual bonuses of two months' salary, no more retirement at 53)? Suppose, after pocketing some of the bailout, we threaten to collapse and make a mess of "Europe"?

Greece now knows the terrific strength of weakness. Beware of Greeks -- or any other people -- receiving gifts.

Washington has a spending problem, not a revenue problem

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click to watch video

Video: Ryan: "Washington has a spending problem, not a revenue problem." "The people who sent me here from Wisconsin sent me here to get spending under control so that they don't have their taxes raised. That's how I see my job." - Fox News Channel, On the Record with Greta Van Susteren April 28, 2010

Opening remarks delivered at the National Commission on Fiscal Responsibility and Reform  by Congressman Paul Ryan  April 27, 2010  Video: 

Just about everything has been said but not everyone has said it. Let me try and say something a little different. 

First to the two chairmen - Senator [Alan] Simpson, Mr. [Erskine] Bowles - each of you has a great reputation of integrity, and I look forward to working with you in this effort.

Most of us were in Congress during the last economic crisis.  That was a crisis where the Chairman of the Federal Reserve and the Treasury Secretary came rushing to the Hill in panic mode. We all got together and we governed in a panicked situation. 

We have before us the most predictable economic crisis that we have ever had in this country. We all know that. We also are getting a good grasp of the size and the magnitude of this crisis. Sovereign debt crises are popping up all over the world, and we are kidding ourselves if we don't think it could come to us next.

Here is one of the problems that we're going to have to end up discussing: as we know, health care is the biggest part of this looming crisis. It doesn't matter how you voted on this last bill, it's law now.

We just took $529 billion of savings out of Medicare, not to go toward extending Medicare solvency, but to go towards a new entitlement.  We just increased the size of Medicaid by a third.  We now have a new health care entitlement. In entitlement speak we used to call it the "Big Three" - Medicare, Medicaid, Social Security. Now it's the "Big Four". That's an issue we are going to have to talk about - what do we do about this new entitlement? 

Also, just in this session of Congress, we have passed $1.8 trillion in new spending, coupled with $670 billion in new taxes.  I would argue that our fiscal trajectory was bad and now it's getting worse and that's just from my own personal perspective.

I have put a number of ideas out there myself. I kind of think of myself as a canary in the mineshaft on entitlement reform. But if there is anything I've learned from my own experience, it's that the American people are ready to be talked to like adults.  They are ready to know the fiscal facts.  If there is one thing we can accomplish with this effort, it is better public education about the nature of this problem and educating our colleagues in Congress on the nature of this problem.

I too, like [Congressman] Jeb [Hensarling of Texas] said, look at this with an open mind, not an empty mind.  If you look at the math of all of this, spending is the culprit. Mathematically speaking, you literally cannot tax your way out of this problem.  I don't think we should go down that path of trying to tax our way out of this problem. 

If you look at the Congressional Budget Office models of the future of our country, the economy shuts down mid-century.  Their computers cannot think of any way out of this fiscal problem we have. 

We know for a fact, it is irrefutable - we are giving the next generation an inferior standard of living. We have never done that before in this country. The legacy of this country has always been - you take on the challenges before you to make sure that your kids and grandkids have a better life.  All of us agree on this legacy, but it's going to take some heavy lifting to uphold it.

When you look at the spending problem, the sooner you act, the much better off you are going to be.  Millions of our fellow citizens have already organized their lives around these programs.  Acting very soon, you can assure that their lives will not be uprooted.  They will not have the rug pulled out from underneath them.  We can make prospective changes going forward so people have time to organize their lives around these reforms - running room so to speak.  But if we keep kicking this can down the road and not confronting these massive spending challenges that kind of assurance to those who already organized their lives around these benefits, cannot be maintained. 

We are in a situation where time is of the essence to deal with this.  We have to spend our time on the spending side of the ledger because that is what is driving this.  At the end of the day, the levels of personal and economic freedoms, standards of living, jobs, and international competitiveness have got to be the overarching concerns that drive the decisions we end up making.

The American Spectator: The Man With the Plan

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The American Spectator

U.S. Congressman Paul Ryan


The Man With the Plan

By Philip Klein from the April 2010 issue

In late January, President Obama dazzled political reporters when he addressed a gathering of House Republicans in Baltimore. The press marveled at Obama's intelligence, command of the facts, and ability to swat down GOP arguments effortlessly during the 90-minute exchange. But at one point, Obama took a question from Wisconsin Rep. Paul Ryan, the Republicans' resident policy whiz, and clearly met his match. 

In his State of the Union address just two days earlier, Obama had vowed to "freeze" non-security-related discretionary spending as part of a new White House campaign to create the appearance that the administration was doing something to address ballooning deficits. Unlike mandatory spending on entitlement programs, such as Medicare and Social Security, that grow without any explicit action by Congress, new discretionary spending must be passed by Congress and signed into law by the president. 

"I serve as a ranking member of the budget committee, so I'm going to talk a little budget if you don't mind," Ryan said to Obama. "The spending bills that you've signed into law, the domestic discretionary spending has been increased by 84 percent. You now want to freeze spending at this elevated level beginning next year. This means that total spending in your budget would grow at 3/100ths of 1 percent less than otherwise. I would simply submit that we could do more and start now." 

In his response, Obama said he wanted to "just push back a little bit on the underlying premise about us increasing spending by 84 percent." He insisted, "The fact of the matter is, is that most of the increases in this year's budget, this past year's budget, were not as a consequence of policies that we initiated but instead were built in as a consequence of the automatic stabilizers that kick in because of this enormous recession." (The term "automatic stabilizers" refers to government payments such as welfare and unemployment benefits that tend to increase during an economic downturn.) 

But Ryan shot back by noting a basic flaw in Obama's analysis. "I would simply say that automatic stabilizer spending is mandatory spending," he explained. "The discretionary spending, the bills that Congress signs that you sign into law, that has increased 84 percent." 

In a tacit acknowledgement that he had been bested, Obama replied, "We'll have a longer debate on the budget numbers, all right?" and then proceeded to the next question. 

A BIT LATER IN THE SESSION, however, Obama moved back to Ryan on a different topic. After a year of arguing that Republicans had presented no ideas on how to address the nation's fiscal crisis, Obama mentioned that Ryan had produced a "serious proposal" to do just that -- before offering his critique. 

The proposal in question was Ryan's "Roadmap for America's Future," a sweeping plan to stave off the nation's looming economic and fiscal collapse by changing the tax code, overhauling the health care system, and reforming the nation's major entitlement programs. Its debt-reducing claims aren't based on mere fantasy -- the Congressional Budget Office has determined that the plan would boost economic growth while making Medicare and Social Security solvent. And it accomplishes these aims without raising taxes or affecting the benefits of current retirees. 

If the Baltimore event accomplished anything beyond giving the media a new reason to swoon over Obama, it drew attention to the "Roadmap," which had largely been confined to the conservative policy ghetto since an earlier version was introduced in 2008. In the days and weeks following the summit, Ryan won praise from pundits on the right and left for at least having the courage to present serious solutions to the nation's fiscal crisis. But at the same time, it became clear why most other politicians were unwilling to do the same. 

"The entire Democratic political machine, right through the DNC, launched into a very organized attack mode," Ryan recalled in a phone interview with TAS. 

The praise Obama offered for the plan soon looked like a trap intended to elevate the plan just so Democrats would have something to knock down. It became a way for their party to go on offense after being clobbered for a year on the economic stimulus package, as well as the cap and trade and health care bills. 

Peter Orszag, director of the Office of Management and Budget, tore into the Ryan plan. Democrats distributed "fact sheets" and held a media conference call to rip into the proposal further. "[I]t's a roadmap right into the economic ditch that we got ourselves to begin with," Rep. Chris Van Hollen, who serves as chairman of the Democratic Congressional Campaign Committee, told the influential liberal website Talking Points Memo. "Put it this way. For seniors on Medicare, it's a dead end." 

In the wake of the uproar, Republican leaders tried to distance themselves from the proposal, emphasizing that while it contained good ideas, Ryan's plan wasn't the official Republican budget. In an election year during which the GOP is poised to make big gains, Republicans don't want to give Democrats an easy opportunity to paint them as the party keen on destroying Social Security and Medicare. But if Republicans are to regain any credibility as a party that wants actually to limit government (as opposed to just talk about it when in the minority), then they can't shy away from this debate. The looming fiscal crisis is too severe, it's approaching too soon, and it's far too big of a threat to the American way of life. 

LAST OCTOBER, a new government took power in Greece and revealed that the nation's annual budget deficit would be more than twice what had previously been forecast. In the ensuing months, the country's creditors fled, its debt was downgraded, and its cost of borrowing surged -- just when the country desperately needed money. In response, the government scrambled to roll out proposals to get its deficits under control by slashing social spending, dramatically hiking taxes, and freezing public sector wages-- triggering nationwide strikes. Before long, Greece was pleading with other reluctant European Union member states for a bailout. 

One of the major obstacles to addressing the looming entitlement crisis in the United States is that it's very difficult to communicate the urgency and magnitude of the problem. Screeds about the long-term Medicare deficit of $38 trillion, or America's combined unfunded liabilities of $107 trillion in current dollars, often fall on deaf ears because the numbers involved are inconceivable. And even when people accept the vague idea that we're on an unsustainable fiscal path, hearing projections about where we'll be decades from now makes them think that we have plenty of time to figure things out, somehow, at some point, down the road. While there are always caveats involved in drawing economic parallels among countries, the Greek collapse demonstrates what a fiscal crisis means in human terms. It also serves as a warning that the day of reckoning could come a lot sooner than we imagine. 

Investors look at the ratio between debt and gross domestic product as a key indicator of a nation's solvency, because it gives them an idea of how much tax revenue a country could conceivably raise to pay off its debt. In 2009, Greece's debt-to-GDP ratio stood at 113.4 percent. According to CBO projections, the U.S. is on a trajectory to eclipse that mark in 2026, just 16 years from now. In the decades that follow, that ratio is expected to rocket to 223 percent by 2040, 433 percent by 2060, and 716 percent by 2080. But just as a reckless spender with a $40,000 salary would max out his credit cards long before running up $300,000 in credit card bills, the U.S. financial crisis would occur a lot sooner. 

"You don't get there," explains John Cochrane, a professor of finance at the University of Chicago's Booth School of Business. "Long before you reach debt that's hundreds of percent of markets say, 'No, we're not doing that, we're not lending you anymore,' and then you have a huge crisis on your hands. Witness Greece." 

As Cochrane describes it, "You should really think of 30-year debt as stock in the U.S. government." Investors who buy Treasury bonds are making a judgment about the government's ability to pay them back over a 30-year time frame. For now, the U.S. still enjoys low borrowing costs because investors still believe that American leaders will eventually figure out a way to deal with the fiscal crisis. But all it would take would be for a major investor, such as China, to lose faith in the American government, and the crisis can ensue quite suddenly. There's no "magic number" of debt-to-GDP ratio at which point investors lose confidence, Cochrane emphasizes. In 1945, for instance, the U.S. government's ratio peaked at 121.7 percent. 

"The U.S. can raise enormous amounts of money if people are convinced that there's a plan for paying it off," Cochrane says. "At the end of World War II, we had huge debt. Why was that okay? Well, people understood the war was temporary. They understood when the war was over we would stop spending money like crazy and there was a sense that there was a way for the U.S. to pay off that debt." 

A key difference between the U.S. and Greece, Cochrane notes, is that the U.S. can print dollars and Greece can't print euros. What this means is that America would likely attempt to inflate its way out of a debt crisis by manufacturing money and using it to pay off the outstanding bonds. The problem is that this would produce a massive inflation that could occur on top of a stagnant economy. Furthermore, paying off lenders with devalued currency would effectively be the same as default. 

"Really bad inflation actually happens when the economy is not booming, and that certainly happened in the late 1970s," Cochrane says. "And the kind of inflation to worry about is the inflation that springs up seemingly on its own while the economy is still in trouble because people are running away from U.S. government debt." 

The only way to avert such awful alternatives is to act preemptively to reassure investors. "The important thing is convincing the markets that you have a plan, and you're going to figure this out sooner or later," Cochrane says. 

A NATIVE OF JANESVILLE, Wisconsin, Paul Ryan developed his political philosophy reading the works of free market authors including Milton Friedman, F. A. Hayek, and Ayn Rand. After graduating with a degree in economics and political science from Miami University in Ohio, Ryan worked as a speechwriter for Jack Kemp and William Bennett at the think tank Empower America (a predecessor to FreedomWorks) and served as a legislative aide to Sen. Sam Brownback. Since winning his congressional seat in 1998, Ryan has pushed for tax reform and garnered attention as one of the leaders of the fight for Social Security personal accounts, which he tirelessly campaigned for during President Bush's failed reform effort in 2005. 

On several occasions, Ryan has drawn fire from limited-government advocates, most notably when he voted for President Bush's Medicare prescription drug plan and for the $700 billion financial bailout. In both cases, he helped provide cover for other Republicans to vote for massive expansions of government, and opened himself up to charges of hypocrisy. But Ryan insists that viewed in context of the alternatives with which he was presented, his "reasoning at the time was sound." 

"You don't get to take the vote you want in Congress," Ryan laments. "Sometimes you have to take votes that you don't want to take, but they're the best of the two choices." 

In the case of the Medicare expansion, which by some measures added $15.6 trillion to the long-term entitlement deficit, Ryan recalled that "President (Bush) was really clear to me at the time, and I talked to his chief of staff and others as well, that he was either going to sign the House-passed bill, which had my health savings accounts amendment and real free market choice and competition like Medicare Advantage in it, or the Senate bill, which was just a big government-run program." In the end, he voted for the bill with some free market elements. "That was the choice he gave us," he says. "It was not a choice I liked." 

As for the Wall Street bailout, Ryan said he was convinced that it was necessary to avert a complete economic collapse, and argues that if a full-fledged depression ensued, it would have made it a lot easier for Democrats to pass their agenda and thus more devastating to the free market in the long run. "I think, more people, if we were in a depression, would be susceptible to their worldview just like much of the New Deal programs came in," he said. 

After Republicans lost control of Congress in 2006, Ryan emerged as the ranking minority member of the House Budget Committee, a position that gave him more staff to work with and the ability to ask the CBO to evaluate his proposals on a higher-priority basis. 

"I had all along in my career in Congress been watching our fiscal and economic situation steadily deteriorate, and I noticed that nobody was proposing solutions for fear of political demagoguery," Ryan says. "If that continues, it's very clear to me that we are sleepwalking toward a fiscal crisis in which the alternatives would be ugly and we would become more of a social welfare state." 

Taking advantage of his new position, Ryan set out to find a comprehensive approach to the looming fiscal crisis. After a year of writing and running the numbers, he introduced his first version of the "Roadmap" in May of 2008, which formed the basis for his updated proposal released this year. In the intervening time period, the task became even more daunting. 

"In 2008, when I introduced this thing, I thought we'd have 10 years before it was too late to turn back, and maintain what I call the American idea-limited government premised on freedom and liberty, free enterprise, and entrepreneurial society," he said. "Now, I think we have about half that time, because of the economic crisis that we had, and because of the agenda that's moving through Washington right now." 

THE "ROADMAP" is a rare type of congressional proposal that delves into political philosophy (with references to the likes of Thomas Jefferson, John Locke, and Émile Durkheim) and also makes a moral case that the expansion of the welfare state leads to the erosion of the "American character" of freedom and personal responsibility. Yet at the same time, it presents a pragmatic policy vision for averting fiscal disaster while causing the least possible disruption in everybody's lives. The plan is premised on the idea that the problems facing America are interrelated. You can't get a handle on our national debt without reining in Medicare; you can't restrain the growth of Medicare without reforming the health care system; you can't change the health care system without touching the tax code; and fundamental tax reform is necessary to spur economic growth, which in turn will make it easier to pay off our debt. 

Taken together, the plan earned an impressive grade from Congress's official scorekeeper. By 2080, according to CBO's "alternative fiscal scenario" that assumes the continuation of current policies, the U.S. would be dedicating a staggering 34.4 percent of its GDP to government spending, running an annual deficit of 42.8 percent, and carrying debt at 716 percent of GDP -- which as discussed above, is a point that we'd never actually reach. By contrast, under the "Roadmap," the CBO estimates that in the same year, government spending would be just 13.8 percent of the GDP, the government would be running a massive surplus of 5 percent, and it wouldn't be holding any debt. 

Yet these numbers are conservative estimates, because they don't even take into account how much better off the economy would be under the "Roadmap" as a result of getting our debt under control. According to the CBO, the nation's economic output per person would be 70 percent higher in 2058 under the Ryan plan than it would be if current trends continue. After that year, the CBO's model of current trends actually breaks down "because deficits become so large and unsustainable that the model cannot calculate their effects." But as a result of putting the nation's finances on a sustainable path, the Ryan plan is projected to foster strong economic growth in the ensuing decades. And again, while these dates seem way off into the future, if the nation were put on the right course, it would provide a lot of reassurance to credit markets, and keep our borrowing costs lower in the near term. 

Ryan's proposal for health care, which was developed along with Rep. Devin Nunes and Sens. Tom Coburn and Richard Burr, is aimed at moving the U.S. toward a system in which consumers have more control over their health care dollars. The idea is to take the same principles that have driven down costs and improved quality in every other sector of the economy, and apply them to health care, which is currently immune from market signals because of a lack of price transparency as well as the fact that most people get their insurance through government or their employers. 

"I got Lasik surgery 10 years ago, it cost me $4,000, and the laser they use to do it since then has been revolutionized three times," Ryan said. "It's much better, much safer, and it costs $1,600 now. That's 800 bucks an eye instead of two grand an eye. So this sector has proven that it can both bring down cost and improve quality just like the computer sector, just like many other high-tech sectors throughout the country. " 

To help create a consumer market for health care, Ryan would start by ending the discrimination in the tax code that subsidizes the purchase of insurance through one's employer, and use the savings to provide an optional refundable tax credit of $2,300 for individuals and $5,700 for families toward the purchase of health coverage. Any individuals who choose to purchase cheaper, catastrophic health care plans could keep any leftover money and put it in health savings accounts. The proposal would allow people to purchase insurance across state lines and it would create a Healthcare Services Commission that would make price and quality data available to consumers so that they could shop around for the best doctors and hospitals. It would also cap non-economic damages in medical malpractice cases. 

FROM A FREE MARKET PERSPECTIVE, there are some potentially worrisome aspects of the proposal. Like the Senate Democrats' health care bill, the Ryan approach would have the federal government partner with states to create insurance exchanges. Ryan's exchanges wouldn't impose the onerous mandates and regulations envisioned by Democrats. But however well intentioned, as long as the government-run exchange architecture is created, there's a danger that future lawmakers would simply add regulations and expand the exchanges beyond their original purpose, as often happens with government programs. Why not just change the tax treatment, allow interstate purchasing, improve price transparency, and let the free market work the rest out? 

Ryan argues that if we find a way to cover those with preexisting conditions by removing them from the risk pool, it creates a cheaper and better functioning market for the remaining 96 percent of Americans who do not have such conditions, according to estimates. 

"There's a role for government to play to help this market work," Ryan insists. "If you're going to address the issue of the uninsurable, you've got to find some kind of method, or a mechanism, to target those subsidies to people with preexisting conditions....Pull the uninsurable people out of the pools effectively, and you allow the market to work much, much better for health insurance." Ryan said he is confident that there were enough "stopgaps" in the proposal -- including allowing for the purchase of insurance across state lines and permitting people to move in and out of exchanges at will -- to ensure a functioning free market. 

His proposal also calls for adding a consumer-based element to existing government programs Medicare and Medicaid. For Medicare, Ryan would maintain the existing program as is for those over 55 who have already built their lives around traditional Medicare. But for those under 55, the program would transition into one where individuals would be given a voucher toward the purchase of private health insurance. The voucher would be worth $11,000 per beneficiary on average, but it would vary based on income and health status, so that the wealthiest and healthiest enrollees would receive the lowest-value vouchers and the poorest and sickest would receive the highest-value ones. In addition, the lowest-income beneficiaries would be given money to put in a medical savings accounts to help pay for out-of-pocket expenses. Ryan does something similar with Medicaid, whose beneficiaries would receive $11,000 on top of the refundable tax credit for health insurance. 

During the past year's health care debate, Republicans attacked the Medicare cuts in the Democratic bills, often employing liberal rhetoric that reinforced the untouchable status of the program. While it provided short-term political benefits, it also made the environment a lot harder for Republicans, such as Ryan, who propose reforming the system. In fact, in his critique of the Ryan plan, Obama noted that Republicans had lambasted the Democratic bills for "slashing Medicare" and said their attacks "scared the dickens out of a lot of seniors." 

Ryan acknowledges that "we have to be careful about how we use our rhetoric so we don't dig ourselves into an unsustainable fiscal path." But he says that there was a legitimate criticism that the Democratic health care plans cut Medicare benefits to finance a new entitlement and that they gut Medicare Advantage, the one free market element of the program. Ryan says that as his plan shows, it isn't necessary to change Medicare for current retirees. 

The White House charged that Ryan's plan would significantly reduce Medicare benefits over time because the vouchers wouldn't grow at the same level as medical inflation (they would be set to grow at a rate that blends health care inflation with overall inflation). This is backed up by the CBO, which estimated that although the "Roadmap" would bring down health care spending, because of the lower spending, "it is likely that fewer services would be provided and treatments would be less technologically advanced..." 

Ryan counters that once the changes are made to the overall health care market to make it more consumer-oriented, that in turn will drive down prices and improve quality, such as the case with his Lasik surgery. 

"What I'm trying to do is bring free market principles into the health care sector to go at the root cause of inflation itself, so that that voucher, that health care dollar, goes a lot farther, because it's going through the individual and not coming from government," he says. 

When it comes to retirement planning, there's wide agreement on the fact that if we do nothing, Social Security will not be available for future generations. Just keeping this one program afloat by 2037 would require either slashing benefits by 24 percent, hiking payroll taxes by 31 percent, or some combination of the two. Under the Ryan proposal, the program would stay the same for those older than 55, but would allow younger individuals the choice of shifting a portion of their payroll taxes into personal investment accounts. At the same time, it would add an element of means testing by making benefits outside of the accounts grow slower for wealthier individuals. The plan would also slowly increase the retirement age. 

TO PROVIDE A SENSE of the severity of the nation's coming fiscal crunch, the CBO estimated the marginal tax rates that would be necessary to balance the long-term budget strictly through higher income taxes. It found that the rate for the lowest bracket would have to rise from 10 percent to 25 percent; those in the 25-percent bracket would have to pay 63 percent; and the top rate would need to be increased from 35 percent to a staggering 88 percent. But these numbers are only theoretical. In reality, the CBO tells us, "Such tax rates would significantly reduce economic activity and would create serious problems with tax avoidance and tax evasion. Revenues would probably fall significantly short of the amount needed to finance the growth of spending; therefore, tax rates at such levels would not be feasible." 

The problem with raising taxes to pay down the debt is that the kinds of taxes that would be raised -- on marginal income, savings, investment, and capital gains -- would cripple the economy, which in turn would make it harder to pay off the debt. 

"The crucial thing about long-term budgets is not really the tax rate, it's the growth rate of the economy, and we can pay off the debt even with low taxes, if we had enough economic growth," Cochrane says. "When the growth stops, at that point your ability to pay off the debt in the long run is really in danger." 

Cochrane considers the current tax system "chaotic" and "a fiesta for lawyers, lobbyists, and accountants." 

Ryan's proposal is intended to change the tax code in a direction that would promote more economic growth, by creating an optional, flatter tax system with just two rates (10 percent and 25 percent) and without any deductions other than the tax credit for health insurance. The plan gets rid of double taxation on interest, capital gains, and dividends. He also would eliminate the corporate income tax to make American businesses more competitive, and replace it with an 8.5 per-cent "business consumption tax." The consumption tax could be "border adjustable" so that it's paid when imports enter the country, but not on exports. 

"I fundamentally believe this is the part of the plan that is the pro-growth part of the plan," Ryan says. "This is the growth engine that reignites an entrepreneurial, risk taking economy, which finishes the job of fixing our fiscal problems." 

He notes that the CBO estimates about his plan's budget balancing potential are conservative because they assume a standard rate of growth. "Imagine what this would look like with respect to jobs and prosperity and reaching a balanced budget and paying off the debt, if we actually injected the growth assumptions that I think would realistically come from this kind of tax reform," he says. 

Chris Edwards, the director of tax policy studies at the Cato Institute, says that Ryan's re-forms of the individual tax code are "generally excellent" but fears that the business consumption tax could lead to bigger government. 

"The base of such a tax is about five times wider the base of a corporate income tax, so while economists may say that's more efficient, if you have an extremely broad-based tax, it's very easy for politicians to raise money in the future just by raising the rate," Edwards says. 

Instead, Edwards suggests just slashing the current rate. "If you had a 15 percent rate, nobody would care if it's border adjustable or not," he says. 

RYAN HIMSELF EMPHASIZES that the plan is designed to be flexible, and that he welcomes alternative ideas. "This isn't a take it or leave it plan," he says. "It isn't meant to be. It's a vision, which in my opinion reclaims the American idea while keeping promises to current generations who built their lives around these programs." His primary intention, he says, was to trigger "an adult conversation" about the nation's fiscal crisis. 

The politics of passing a plan as sweeping as the "Roadmap" are challenging, even if Republicans manage to retake control of Washington and prove serious about reining in government. The Founders intentionally designed a system of government that makes it difficult to enact major changes. While that has been to the benefit of limited-government advocates when it comes to preventing the creation of new programs (witness the difficulty Democrats have encountered trying to pass a health care bill despite huge majorities in Congress), it also makes it hard to reform those programs once they do get passed. Ronald Reagan did not undo Medicare or Social Security, and George W. Bush only succeeded in passing the largest expansion of entitlements since the Great Society. 

Many of the ideas promoted by Ryan have surfaced before and failed to gain traction. President Bush couldn't even get a vote on Social Security personal accounts when Republicans controlled both the House and Senate. Though Bush created a commission on tax reform, its recommendations, which were much less ambitious than Ryan's proposals, fizzled upon introduction. And when John McCain proposed ending the tax code's discrimination against individuals who purchase health insurance on their own during the 2008 presidential campaign, Obama successfully portrayed him as a tax hiker. 

Furthermore, the most impressive aspect of the Ryan plan is how it elegantly weaves together policies that interact with one another to solve multiple problems. For instance, one of the ways his plan is able to make Social Security solvent, according to the CBO, is that by removing the tax subsidy for employer-based insurance, the government is able to capture additional pay-roll tax revenue. Yet during the past year's health care debate, Republicans argued for incrementalism. 

"Rep. Ryan's plan is the mirror image of Obama's agenda," Ramesh Ponnuru wrote on National Review's blog. "It attempts to move America in a freemarket rather than social-democratic direction, and I support that goal; but it is just as transformational, just as ambitious, just as immodest. I don't think that the public, or the political system, can bear this type of comprehensive change." 

Asked whether he thought that Congress had the ability to pass something as ambitious as his proposal, Ryan responded, "I think the answer is yes, if you win the debate. But you've got to get on with the debate in order to win it." If necessary, he says, the plan could be broken into parts, but that would require more short-term borrowing. 

The key challenge to reforming entitlements is that those who are currently benefiting from the status quo are older and more politically active than younger Americans who have the most to lose. While Medicare and Social Security are of primary importance to older voters, younger voters aren't thinking about their retirement. Ryan says he tries his best to engage younger audiences through the use of social media such as Facebook and Twitter. "I'm one guy from Wisconsin with a plan to try and get this conversation rolling and I'm doing everything I know how," he says. 

IN HER GROUNDBREAKING HISTORY of the Great Depression, The Forgotten Man, Amity Shlaes argues that not only did Franklin D. Roosevelt's policies prolong the economic downturn, but in the name of helping some Americans, he imposed hardships on others. She sees a parallel to today, when politicians in both parties perpetuate the third-rail status of entitlement programs with reckless disregard for future generations. 

"The Forgotten Man in the 1930s wasn't only FDR's poor man, it was also the man who would shoulder the burden of the progressive experiment," she says. "Today, the man who shoulders the burden of the progressive experiment most seriously is not older Americans from 40 up, but rather those under 40 who will have to pay higher taxes and get fewer benefits. No generation has been more forgotten than that generation that is now children." 

Without changes, Ryan says, younger Americans are guaranteed to grow up in a nation in which "the best century will be the last and not the current one." He says, "That's the path we're on right now. The sooner we can help Americans see that, the sooner we can get the kind of changes we need to prevent it." 

There are arguments in favor of gradualism, and those on the right certainly shouldn't live in a fantasy world detached from what is politically feasible. But the looming fiscal crisis is so severe and approaching so rapidly that conservatives can't afford to postpone making the case for something on the scale of what Ryan is proposing, if not his specific plan. During this year's congressional races and the next presidential primaries, any candidate who attacks Obama's reckless spending should be put to the Ryan test. That is, anybody who expects to be taken seriously as a limited government conservative should endorse specific solutions to tackle the debt. To avoid discussing these issues during an election year means preemptively surrendering to the reality of a leviathan state. To walk away from this fight guarantees that future generations will be forced to live in the wreckage of a collapsed United States. If the conservative movement was built for any reason and exists for any purpose, it is to fight this battle.

Philip Klein is The American Spectator's Washington correspondent. 

Milwaukee Journal Sentinel Op-Ed: Costs of this debacle will be high

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Video: Paul Ryan's remarks on House floor in opposition of Majority's health care bill 3/21/10 - U.S. House of Representatives

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Audio: Paul Ryan: Repeal it and replace it with consumer-driven, patient-centered reforms - a stark contrast to this government-run takeover    3/22/10 - Midday with Charlie Sykes, AM 620 WMTJ

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Video: Paul Ryan speaks with Mike Allen about the House health care vote and how to fix what's truly broken in health care 3/23/10 - Politico Video Series: Health Care Diagnosis


Milwaukee Journal Sentinel

Costs of this debacle will be high

Republican Rep. Paul Ryan voted no on Sunday. Here's his take on health care reform.

By Paul Ryan

Posted: March 23, 2010 

The legislative victory among Washington's political class comes at a high cost for Wisconsinites forced to swallow this bitter pill.

This massive health care overhaul - a remake of one-sixth of our economy - will exacerbate the very problems this reform effort sought to address. It will dramatically alter our deteriorating economic and fiscal conditions for the worse and may irrevocably impair the American identity.

Sky-rocketing health care costs are drowning families, businesses and governments in red ink - leaving millions priced out of the market and without coverage. This legislation - with its maze of mandates, dictates, controls, tax hikes and subsidies - pushes costs further in the wrong direction. 

Premiums in the individual market would rise from 10% to 13% for families. Our debt and deficit crisis - driven by $76 trillion in unfunded liabilities - would accelerate from the creation of a brand new entitlement and an increase in the federal deficit by $662 billion, when the true costs are factored in.National health expenditures will increase by an additional $222 billion over the next decade, according the president's own chief actuary, and $2.4 trillion in the decade after the new entitlement is up and running.

The passion against this intrusion goes beyond the mind-numbing numbers. Health care affects each of us in an intimate and personal way. The American people's engagement is driven by our deep aversion to the federal government's unprecedented reach into our lives. The entire architecture of this overhaul is designed, unapologetically, to give the government greater control over what kind of insurance is available, how much health care is enough and which treatments are worth paying for.

The massive expansion of the federal government into the personal health care decisions will drive providers out of business and force employers to dump their workers on to government-controlled exchanges. Because Washington doesn't approve, millions of Wisconsin seniors will lose their Medicare Advantage plans and millions more will lose the consumer-friendly high-deductible health plans they enjoy.

There is another personal cost to this deluge of new government spending and control. Wisconsin remains in dire need of sustained job growth and robust economic recovery. This legislation will hit our economy with $569 billion in tax increases - tax hikes that will hit workers, families and job-creators alike.

The true shame of this debate is that there are real problems in health care that need to be fixed. Almost a year ago, I introduced the Patients' Choice Act to fix what's broken in health care, without breaking what's working. I've spoken with Wisconsinites for years about patient-centered reforms that would make possible universal access to quality, affordable health care with the patient and the doctor - not the government or insurance companies - as the nucleus of the health care market. These alternatives were ignored by Democratic leaders in Washington - and the concerns from Wisconsinites and an engaged American public were dismissed by Washington's political class.

The yearlong partisan crusade - right through its ugly conclusion - revealed that this debate was never about policy but rather a paternalistic ideology at odds with our historic commitment to individual liberty, limited government and entrepreneurial dynamism. The proponents of this legislation reject an opportunity society and instead assume you are stuck in your station in life and the role of government is to help you cope with it. Rather than promote equal opportunities for individuals to make the most of their lives, the cradle-to-grave welfare state seeks to equalize the results of people's lives.

We must begin anew on mitigating the disaster from this health care debacle. Let's repeal the costly missteps before they hit with full force. Let's make certain we do not simply retreat to an earlier point on the same path to decline. Let's chart a new direction that will restore the promise and prosperity of this exceptional nation - and let's do it together.

U.S. Rep. Paul Ryan (R-Wis.) represents the 1st Congressional District.

The Final Chapters in the Health Care Debate

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Video: Paul Ryan discussing what real health care reform should look like 3/18/10 - The Charlie Rose Show

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Video: Paul Ryan on Fox & Friends, with guest host Dana Perino, talking about the Majority's attempted end-game for health care reform 3/19/10 - Fox News Channel

The Final Chapters in the Health Care Debate

 By Paul Ryan

 Representing Wisconsin's 1st Congressional District

 March 20, 2010 

Congress stands at the brink of jamming through the largest entitlement expansion in 40 years, the largest tax increase in American history, and a consequential acceleration of our nation's march toward bankruptcy. Through a cynical "deem-and-pass" procedural maneuver, the U.S. House of Representatives is set to send the Senate-passed health care overhaul to the President's desk on Sunday, while voting on a "reconciliation" bill that includes an array of new tax hikes and back-room deals.

If the consideration of the bill progresses as the Democratic Leadership intends, the House will send the 2700 page overhaul of one-sixth of the U.S.economy to the President's desk without an up-or-down vote. The use of "deeming and passing", employing the budget reconciliation process, and making deals with Members behind closed doors have all fueled resentment among the American people, further eroding our trust in Washington. The ugly process speaks to the even more troublesome policies that have been unable to stand on their own merits. 

The entire architecture of this health care overhaul is designed to give the federal government control over what kind of insurance is available for patients, how much health care is enough, and which treatments are worth paying for. No longer will patients and doctors be in control of individual health care decisions, instead government boards and bureaucrats will be the primary deciders. 

Let's also take a quick look at the costs of this legislation. Much is made of the Congressional Budget Office scores on deficit reduction, but the reality of this bill violates the President's promise that this legislation will "not add a dime to the deficit." Rather than provide the CBO with an honest bill, the authors of this bill gamed the legislation to get the score they sought - 10 years of revenues, 6 years of spending; double counting savings from Medicare cuts,Social Security taxes and long-term care insurance premiums; shell games and smoke and mirrors. 

When you strip away the gimmicks and the faulty assumptions, it is clear this bill does not reduce the deficit and it does not contain costs. Instead, it creates a brand new open-ended entitlement at a time when we have no idea how to pay for our current unsustainable entitlement programs. This overhaul imposes job-killing tax hikes on all Americans at a time when we desperately need to get sustained job creation and economic growth going again. Most importantly, this legislation fails to improve the quality and affordability of health care in America.

Unfortunately, the Majority's willingness to proceed with this bill, which fails to address the shortcomings of our health care system, shows that this debate is not, and never was, about health care - it's about ideology. The Democratic Leaders in Congress saw the turnout at Townhall meetings in August, they saw the reaction of the American people when both parties were able to present their ideas at the Blair House Summit and instead of trying to reach a genuine consensus on reforms, they doubled down on this flawed legislation. 

There are real problems that need to be fixed in health care and we could have done so in a bipartisan way. It did not have to be this way. Almost a year ago, I introduced the Patients' Choice Act, which would fix what's broken in health care, without breaking what's working. This legislation shows it is possible to achieve universal access to quality, affordable health care with the patient and the doctor- not the government or insurance companies - as the nucleus of health care in America. Every American should have access to affordable health insurance, and the ability to acquire preventive health careand treatment, regardless of employment, health status, or income level. 

We all agree that meaningful health care reform is long overdue, but it is increasingly clear that Washington's trillion-dollar, two-thousand page overhaul will not only fail to address what's broken in health care - but will actually make matters worse. If we are serious about reaching bipartisan solutions, we ought to scrap this massive overhaul and start over - working from a clean sheet of paper to advance common sense patient-centered reforms.

Washington Post Op-Ed:What Real Reform Should Look Like

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The Washington Post

What real health reform should look like 

By Paul Ryan

Monday, March 15, 2010; A15 

Today, the House Budget Committee is to mark up a "reconciliation" vehicle, initiating the greatest expansion in government and entitlement spending in a generation through a partisan process to push "health-care reform" across the finish line. 

Despite claims of transparency and calls for a "simple up-or-down vote," there is nothing simple about this process. This convoluted legislative charade demonstrates how far the Democratic majority has wandered from real health-care reform and cost control, employing any means to achieve political victory. 

Through any analytical lens, the legislation will not address the central problem of skyrocketing health-care costs. The Congressional Budget Office estimates that families' premiums could rise 10 to 13 percent; private-sector actuarial estimates top these already high numbers. The higher costs are driven by federalizing the regulation of insurance, narrowing consumers' options and reducing competition among providers. The health-care market would be dominated by government programs and the largest insurance companies, operating as de facto government utilities. 

Rather than tackle the drivers of health inflation, the legislation chases the ever-increasing premiums with huge new subsidies. Already, Washington has no idea how to pay for the unfunded promises in Medicare, Medicaid and Social Security -- and creating this new entitlement would accelerate our path to fiscal ruin. When you strip away the double-counting, expose the hidden costs that must be funded and look at the price tag when the legislation is fully implemented, the claims of deficit reduction are as hollow as claims of cost containment. 

This legislation includes a range of job-killing tax hikes and controls on all Americans -- to fund this new entitlement and to penalize employers and individuals who don't play by Washington's new rules. The CBO said last July that "requiring employers to offer health insurance, or pay a fee if they do not, is likely to reduce employment." The mix of mandates and higher costs will drive Americans into government exchanges, with an ever-enlarging number reliant upon taxpayer subsidies for their care. The architecture is designed to give the government greater control over what kind of insurance is available, how much health care is enough and which treatments are worth paying for. 

The debacle of the past year's "debate" has been a missed opportunity for real reform. Democrats and Republicans alike have put forward proposals that address the drivers of health-care costs, yet they have been ignored in this sharply partisan crusade. House Republicans continue to offer common-sense solutions, with specific legislation. Last May, Sens. Tom Coburn and Richard Burr and Rep. Devin Nunes and I collaborated to address rising costs while securing access to quality, affordable health coverage for all Americans. The Patients' Choice Act takes on the discriminatory and inflationary tax exclusion, delinking the tax benefit from employers and attaching it to individuals through universal tax credits. The tax exclusion for employer-provided health coverage subsidizes insurance instead of health care, hides the true cost of coverage and disproportionately favors the wealthy at the expense of the self-employed, the unemployed and small businesses. Health-care economists across the political spectrum and reform-minded Democrats such as Sen. Ron Wyden identify the backward tax treatment of health care as a problem that must be addressed. 

The Patients' Choice Act includes additional reforms -- such as an emphasis on preventive care, medical malpractice reform and interstate shopping -- that could be advanced one at a time in a bipartisan fashion to fix what's broken in health care without breaking what is working. 

This year I re-introduced my own proposals to tackle our entitlement crisis head-on. My plan, "A Roadmap for America's Future," fulfills the mission of health and retirement security, lifts our crushing burden of debt, and spurs economic growth and job creation. In stark contrast to the vision being pushed by the majority in Congress, my plan unapologetically seeks to apply our nation's timeless principles -- our Founders' commitment to individual liberty, limited government and free enterprise -- to today's challenges. It does so in a way that honors our historic commitment to strengthening the social safety net for those who need it most. 

If this debate had actually been about health care, we could have worked together to get a grip on costs, make quality care more accessible, address exclusions forpreexisting conditions and realign the incentives of insurance companies with those of patients and doctors. Yet this process -- including its embarrassing conclusion -- demonstrates that the debate has never been about health-care policy but, instead, paternalistic ideology. 

Should the Democrats' health-care train wreck make it to the president's desk, it will be a pyrrhic victory, and its devastating consequences will take their toll on our health-care system, our budget and our economy. 

Paul Ryan (Wis.) is the ranking Republican on the House Budget Committee.

Winning the War on Terrorism

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Winning the War on Terrorism

By Paul Ryan

Representing Wisconsin's 1st Congressional District

March 9, 2010

As readers of this posting know, I spend the bulk of my time working on and discussing domestic issues like health care, jobs, and our budget crisis. Washington's decisions on these issues affect Americans across the country in very intimate and personal ways. The same principle also applies to our nation's foreign policy, and I take very seriously my responsibility to represent Wisconsin's First Congressional District in those decisions.

With this responsibility in mind, I participated in Congressional Delegation trips to Afghanistan, as well as some countries in the Persian Gulf region(specifically Saudi Arabia, Oman, and the United Arab Emirates). Having already shared my experiences in Afghanistan with you, (Lessons from Afghanistan 3/1/2010), I hoped this week to share with you some of the lessons I learned during my trip to Saudi Arabia, Oman and the U.A.E.

The purpose of my visit to the Persian Gulf Region was to evaluate our coalition strategies aimed at combating terrorist financing and recruitment, as well as to discuss ways to more effectively discourage the Iranian regime from its pursuit of nuclear weapons. In addition to meeting with the leaders of Saudi Arabia, Oman, and the U.A.E., we also spent time with intelligence officers and diplomats from the State Department. These meetings and discussions helped highlight some of the important regional dynamics affecting both terrorism and the Iran nuclear issue that are often lost in the greater national security discussion.

Having studied the nature and extent of the Saudi contribution to combating the global terror network, my expectations were quite low. I must admit I was taken aback by how serious and committed Saudi Arabia's new leaders, specifically King Abdullah, are to human rights reforms, as well as shutting down terrorist financing and reducing terrorist recruitment. I've always read and believed that the key to winning the War on Terrorism lies in convincing moderate Muslims to rise up and denounce the use of Islam to justify the violence and intolerance of terrorists. King Abdullah laid out how his government has made significant progress in removing al-Qaeda from Saudi Arabia, as well as progress toward education reform and women's rights. We must do more to encourage similar behavior among reformist Muslim leaders throughout the Middle East.

The other topic that dominated our discussions with the leaders of Saudi Arabia, Oman, and the U.A.E. was Iran. As many readers of this column know, a nuclear-armed Iran poses a serious security threat to the U.S. and our allies in the region. However, it is less well-known that many of the Middle East's Sunni Arab majority states, regardless of their affiliation with the United States, are just as uncomfortable with the current Iranian regime. As was made clear during many of my meetings, Iran's history of belligerence in the region, its inflammatory Islamist rhetoric, and its support for terrorist and insurgent groups throughout the region are just as alarming for many governments in the Middle East.

Last month, Iranian President Mahmoud Ahmadinejad declared that Iran had enriched uranium to 20% purity, thus becoming a "nuclear state." While Iranclaims its program is for peaceful purposes, the regime's aggressive rhetoric and the clandestine nature of the program severely undermine their credibility. We all know that a nuclear-armed Iran poses an existential threat to our ally Israel, as well as a huge proliferation risk. Another theme echoed repeatedly in my meetings with Gulf State leaders was the way nuclear weapons could destabilize the region. Iran acquiring a nuclear weapon would almost certainly spark a nuclear arms race in the Middle East, a scenario that is in no one's security interests. The international community must not allow Iran to continue its clandestine program to develop nuclear weapons.

Iran's missile technology is also of serious concern to the U.S. In addition to the conventional threat, Iran's missile development program shares a symbiotic relationship with the development of its nuclear program. With new medium range ballistic missile tests (barely disguised as "satellite launching operations"), Iran has demonstrated its intent to develop a delivery system for conventional and nuclear warheads to targets beyond just Israel and the Middle East. This clearly presents a concern to Gulf State leaders already suspicious of Iran's intentions.

I listened to these concerns intently, because they underscore common interests we share with any Gulf State leaders. We urged Oman and the U.A.E. to more thoroughly enforce sanctions that prevent missile and dual-use technology from entering and leaving Iran through Omani and Emirati ports. As the Iranian missile threat matures, the Obama Administration should reexamine its decision to scrap construction of missile defense interceptor sites in Eastern Europe. Missile defense must be layered to be successful, and the ship-based system, cobbled together to appease Russia, takes away an important layer of protection and ultimately reduces the system's chances of successful interception. Such actions leave our allies in the Middle East and Europe at risk of both conventional and nuclear attack from Iranian missiles. Furthermore, these actions discourage other states in the region from supporting efforts to prevent missile technology proliferation. 

Iran's support for terrorist and insurgent groups is another serious security concern we share with Gulf State leaders. As you may already know, Iran has topped the State Department's annual list of "Top State Sponsors of Terrorism" for several years running. This support generally includes funding, weapons, and training for Islamist terrorist groups like Hamas and Hezbollah, as well as any other group perceived to be acting in support of Iran's interests or the "Islamic Revolution's principles." 

Many of the terrorist groups Iran supports pose an insurgent threat to moderate Muslim rulers in the Middle East. All these groups have to do is declare these rulers "anti-Islamic" for supporting even minimal reform efforts to expand human rights and economic opportunity for their people. Speaking with these Gulf State leaders highlighted the fact that these reformist, moderate Muslim regimes are the real key to defeating the terrorist threat. We must work with these regional partners to cut off Iran's material and financial support for the terrorist and insurgent groups hindering moderate Muslim rulers from enacting serious human rights and economic reforms. 

There is no question that terrorism and the Iranian regime pose serious challenges to stability in the region and peace around the world. Of the knowledge I gained from this brief but intense visit to the Gulf, the greatest is this: I caught a glimpse of what victory in this struggle really looks like. We must consider all efforts to encourage moderate Muslim nations to focus their attention on reforming their societies with a focus on education, women's rights, economic development, and opportunity. We must also seek their increased cooperation with disrupting international terrorist networks, shutting down terrorist financing operations, reducing terrorist recruitment pools, and confronting regional threats like Iran. We share many common interests with our allies in the region, and we must find ways to build on these common interests to successfully confront the challenges we face in the Middle East.

Fortune Magazine: Broke! Fixing America's fiscal crisis

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Fortune Magazine

March 4, 2010 


By Shawn Tully, senior editor at large

Fortune Magazine

On the eve of President Barack Obama's winter health-care summit, Rep. Paul Ryan is dining at Talay Thai, a no-frills restaurant with metal chairs and Formica tables. On this frigid evening, Ryan strolled coatless to Talay -- "I'm from Wisconsin!" he says -- from his cramped Capitol Hill office, where tonight, as on most nights, he'll sleep on a cot.

Such frugality is fitting for a politician who, as he sips ice water, frets that America is "sleep-walking toward a debt crisis." Ryan tells me: "Within a few years a sale of government bonds will fail. The capital markets will go crazy, and the Fed and Treasury will run to Capitol Hill demanding a giant bailout. Adding Obamacare would make the crisis go deeper and arrive faster."

It isn't unusual to hear such antispending rhetoric from Republicans these days. What makes Ryan a rarity is that he's been preaching cerebral free-market ideas during his 11 years in Congress, despite getting little attention for his views. 

Now the 40-year-old Janesville, Wis., native is emerging as the leading GOP voice on economic policy, thanks to his detailed blueprint for solving what both Democrats and Republicans agree is a perilous fiscal future. (How bad is America's financial picture? The President's budget for 2011 forecasts deficits running at more than $1 trillion, or an unsustainable 4.2% of GDP, in 2020 -- and that assumes low unemployment and decent growth of the economy.)

Republicans aren't the only ones suddenly taking notice of Ryan's views on deficit reduction and government spending. During his now-famous appearance at the Republican congressional retreat in Baltimore earlier this year, the President singled out Ryan. "It was my 40th birthday, and I'm sitting at lunch with my 6-year-old son on my knee," marvels Ryan. "And the President starts talking about me. I was amazed!" 

Obama noted that Ryan had "made a serious proposal" to rein in the deficit and then praised him for at least addressing entitlement spending. Following those apparently peaceful words, Democrats launched a withering assault over the next three days as budget director Peter Orszag, Democratic Congressional Campaign chairman Chris Van Hollen, and House Speaker Nancy Pelosi all pummeled Ryan for threatening the safety net for the elderly and providing tax breaks for the rich.

Ryan got his chance to confront the President at the health-care summit Feb. 25. Seated across from Obama, Ryan addressed him directly with a six-minute, numbers-laden, wonkish analysis of the Senate bill that contradicted the administration's pledge that the plan wouldn't add to the mountainous deficit. 

Ryan correctly stated that the bill projects that Medicare will lower reimbursements to doctors by $371 billion over the next 10 years, yet Congress would cancel those cuts in a separate bill, all part of an attempt to mask the true size of future deficits through "gimmicks and smoke and mirrors." Obama steered the discussion away from Ryan's numbers, and the White House hasn't challenged his analysis.

Ryan's deficit roadmap

What is the Ryan plan , and why is the Obama administration seemingly obsessed with it? Ryan calls his proposal, published in January, the Roadmap for America's Future. It's a remarkably comprehensive, daring manifesto that tackles every part of the budget on a presidential scale, from Social Securityto tax policy to health-care reform. 

The goal is to eliminate the deficit, and eventually all federal debt, without any crippling tax increases. Under Ryan's plan, for example, federal spending would reach just 24% of GDP in 2035 and then fall, vs. the CBO's projection of 34% and rising from there. Ryan would make the deficit disappear by mid-century.

Ryan, to be sure, voted for President George W. Bush's tax cuts, which added to the U.S. deficit, but he blames the current mess on excessive spending, which he proposes to control. 

But he's not trying to gut all programs. He wants to maintain promised health-care and retirement benefits for those who require them -- the sick and the poor, and not just for today's needy but for future generations. But he would also lower future benefits for the middle class. He would index future Social Security benefits to wage growth for, say, a family earning $28,000, but limit increases to inflation for households that made over $149,000.

Ryan also wants to totally change the way the government aids most Americans. His plan would use vouchers and tax credits to allow families to buy their own Medicare plans, private health insurance, and retirement accounts. His view is that by directly handing middle-class taxpayers part of the money the government now spends on their benefits, they will demand bargains and better service. Ryan predicts that what the middle class will lose in guaranteed benefits they'll more than recoup through robust economic growth and lower prices.

Regarding health care...

His prescription for health care is radical: Ryan would eliminate the exclusion allowing companies to lavish on employees tax-free benefits and give the tax breaks to the workers themselves through a rebate of $5,700 a family, or a check for that amount if they don't pay taxes. 

"The problem with both Medicare and private plans is the third-party-payer system," says Ryan. "Consumers, spending their own money, will drive down prices." Ryan proposes a classic flat-tax solution: Americans could choose between using today's byzantine rules and a simplified, post-card model with two rates, 10% and 25%. Believe it or not, the simplified system would disallow mortgage and other deductions.

In February the Congressional Budget Office analyzed Ryan's road map -- and confirmed that it produced the falling deficits and balanced budgets that Ryan promises. "By proposing cuts in benefits, Paul Ryan is demonstrating the nature of the solution that must occur," former Fed chief Alan Greenspantold Fortune. "You can't close the gap with tax increases alone, and if you try to do it, you slow growth and reduce future tax receipts."

Ryan's fan base cuts across party lines. "We both want to inject competition into the marketplace," says Sen. Ron Wyden (D-Ore.), who is co-sponsoring another bill that would hand consumers tax breaks for health care they now get only from employers. "We need ideas and policy, not political points, and that's what Paul is all about."

Despite some bipartisan support, Ryan's ideas are a hard sell, politically speaking. The idea of indexing Social Security to inflation caused an angry backlash under President George W. Bush. On both Medicare and his health-care tax credit, Ryan would restrain expenditures by raising benefits for high earners and most of the middle class at a pace slower than the rate of medical inflation. As a result, Americans would be forced to spend more and more of their own dollars on insurance. Even though Ryan promises to leave today's Medicare benefits in place for people 55 and older, his proposal is bound to raise the ire of the lobbies for senior citizens.

Ryan's proposals contradict the Obama administration's philosophy, which calls for the government to take on more responsibility for citizens' well-being. Budget director Orszag conceded that Ryan "succeeds in addressing our long-term fiscal problem," but takes "a dramatically different approach in which more risk is unloaded onto individuals."

Ryan is a free-market adherent of the old school, who believes it is the government's duty to invest maximum economic power in the hands of individuals. His own story is a primer in self-reliance. Ryan's parents put the kids on an incentive system for allowances -- if they got just one B on their report cards, their allowance was cut from $4 to $2, and a C meant no allowance at all. At 16, he discovered his father dead of a heart attack, and had to inform his mother and older siblings. His older brother Tobin, a private equity executive, says that one of Paul's chores was brushing and braiding the hair of their grandmother, who suffered from Alzheimer's.

Ryan, who majored in economics and political science at Miami University in Ohio, says his chief influences are still thinkers discovered in the soul-searching that followed his father's death, including Ayn Rand, Milton Friedman, and Friedrich Hayek. 

In Washington he pursues an almost ascetic work ethic. He studies budgets and spreadsheets until 11:30 p.m., then crashes on his cot or on a mattress at his sister-in-law's home in Bethesda. He seldom travels to campaign for politicians in other states or to burnish his national image. Instead he grabs the first flight to Wisconsin after the last vote on Thursday or Friday to join his wife and three young children at home.

Back in Washington on Monday mornings, and during the week, he leads about a dozen congressmen, including former football player Heath Shuler (D-N.C.), through a workout called P90X, a punishing bipartisan series of pushups, pull-ups, karate, and yoga. "Paul said I should join the yoga routine, but I can't put my body through those contortions!" jokes Wyden. Ryan is prescribing an equally punishing workout for America's future. It isn't pleasant, it isn't easy, but it may be the regimen on the table.

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